IMO only a matter of time before Mexico announces natural gas storage projects
New analysis | Mexico needs natural gas storage
Mexican Institute for Competitiveness (IMCO) AC
December 1, 2022
Mexico needs natural gas storage for its energy security
The country has only 2.4 days of natural gas storage in three facilities. This figure is below the average days of storage in countries such as Austria (318.3), France (98.8), Italy (93.8) or Spain (34.2).
In Mexico, it is possible to store natural gas in depleted hydrocarbon reservoirs, confined aquifers, saline caverns, and liquefied natural gas tanks.
The country's objective, since 2018, is to reach 5 days of storage, however, the necessary infrastructure has not been developed to achieve this goal.
In Mexico, the lack of natural gas storage infrastructure represents one of the main energy security risks in the country and is exacerbated by abrupt changes in the supply and demand of this fuel.
Worldwide, there are four main technologies for natural gas storage: depleted or economically unviable hydrocarbon reservoirs, saline caverns, confined aquifers, and liquefied natural gas (LNG) tanks - which are not the most efficient form of storage, but which are used mainly for fuel imports. Mexico only has three LNG facilities in Altamira, Ensenada and Manzanillo.
The Mexican Institute for Competitiveness (IMCO) analyzes the different types of viable technology to store natural gas, its adoption in different countries, and the current state of storage in Mexico, as well as the costs to develop competitive storage infrastructure in the country.
Natural gas in Mexico is a key fuel for the generation of electrical energy and for industrial activities. In this context, not having sufficient access and competitive prices is a risk that impacts the entire Mexican economy. Although the "Public policy on natural gas storage" was published in 2018 with the aim of gradually increasing the country's storage capacity up to 5 days, this has not been followed up and the tenders for the four fields with which that was intended to start are suspended.
Based on the assumptions used by the Ministry of Energy in the 2018 Policy , it is estimated that the capital cost of the strategic natural gas storage facilities necessary to meet the proposed goals would be between 428.3 and 2,594.9 million dollars (mdd ), depending on the technology used; that is, between 8.6 and 52.4 billion pesos (mmdp). The lower limit corresponds to reservoir technology that is not economically viable for the extraction of hydrocarbons, while the upper limit corresponds to LNG storage.
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In total, 18 countries of the European Union have natural gas storage facilities. Only 9 Member States do not have storage, which represents less than 5% of the demand for natural gas in the block. With the new regulation, these countries must have inventories equivalent to 15% of their consumption in the facilities of other member countries.
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The country does not have to continue to be exposed to the current vulnerability in the natural gas market. Mexico must strengthen the natural gas storage infrastructure and gradually move towards a minimum of 5 days of inventories, as the 2018 Policy intends .
The cost of the projects is relatively minor compared to the cost of not having a sufficient supply for economic activities and the generation of electricity in Mexico.
Therefore, the IMCO Proposes:
Retake the 2018 Storage Policy and update it to the current demand with the aim of having at least 5 days of storage in the medium term.
Resume natural gas storage projects in onshore deposits depleted of hydrocarbons in Acuyo (Chiapas), Brazil (Tamaulipas), Jaf (Veracruz) and Saramako (Tabasco), as well as others determined by the authorities through technical reports.
Prepare a study on the potential of existing depleted reservoirs in Mexico, taking into account their location, accessibility and existing infrastructure, and carry out a cost-benefit analysis of this technology in comparison with saline caverns and confined aquifers.
The development of storage infrastructure in Mexico is technically and economically viable.
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