Chesapeake Energy Corp (CHK)

[Timothy Smith]

Natural Gas Exports to Mexico Will Support the Increase in Price

Exports of natural gas to Mexico have played an important role in tackling the issue of oversupply in the domestic market. Over the past three years, the natural gas exports to Mexico has more than doubled, and according to a report by Barclays, the demand is likely to increase over the next three years. There are a number of reasons for the increase in demand from Mexico - the country's own reserves have fallen at the rate of 11% while the population and the demand for energy have increased at a higher rate. As a result, the demand gap has increased, which has created a great opportunity for the U.S. According to Barclays, US exports to Mexico will increase from an average of 2 Bcf/d in 2013, to 2.2 Bcf/d in 2014, to 3.5 Bcf/d in 2015 and to 4.5 Bcf/d in 2016.

Natural gas exports to Mexico are beneficial to both countries - U.S. is able to tackle its problem of oversupply in the domestic market and Mexico is getting cheap energy, which gives it competitive edge over a number of other countries and makes it more attractive for investment. Mexico's competitive advantage will likely remain as long as the U.S. shale gas reserves last. These exports will surely help natural gas producers such as Chesapeake and Exxon Mobil (XOM) as the demand will remain high and result in sustained higher prices.