A combination of higher natural gas demand from Mexico's industrial and electric power sectors and increased U.S. natural gas production has resulted in a doubling of U.S. pipeline exports of natural gas to Mexico between 2009 and 2013. Mexico's national energy ministry, SENER, projects that U.S. pipeline exports to Mexico will reach 3.8 billion cubic feet per day (Bcf/d) in 2018. This would be more than double U.S. pipeline exports to Mexico in 2013, which averaged 1.8 Bcf/d. This projected growth is driven mainly by higher demand from Mexico's electric power sector in both the north and interior of the country.
Nearly three quarters of the projected growth in Mexico's natural gas consumption between 2012 and 2027 is projected to occur in the electric power sector (see graph). This growth is largely driven by private and independently operated power plants, whose natural gas consumption is expected to rise at a 7.9% average annual rate, from 1.6 Bcf/d in 2012 to 4.9 Bcf/d in 2027. By contrast, natural gas consumption from plants operated by national energy company CFE grows at just 0.4% per year, from 1.1 Bcf/d in 2012 to 1.2 Bcf/d in 2027. The growth comes largely from new combined cycle plants, which benefit from greater operational efficiencies and lower emission levels compared to other generation sources. Growth sharply accelerates over the near term but continues through 2027, when power sector consumption reaches 58% of total gas consumption, compared to 47% in 2012.
Mexico's projected growth in natural gas consumption occurs in each of its five market regions: Northeast, Northwest, Interior-West, Interior, and South-Southeast. According to SENER, demand growth is particularly strong in the northern and interior regions of the country.
All natural gas pipeline imports from the United States into Mexico enter the country's Northeast and Northwest regions. Some of these imports enter the country as logistical imports on pipelines owned by private entities, as well as by Pemex's natural gas subsidiary PGPB. The term logistical imports refers to imports that arrive in areas with no other form of access to natural gas. The largest growth in projected pipeline imports takes place from nonlogistical imports on PGPB owned pipelines in the Northeast. An increasing portion of this gas flows through the Northeast south to the interior regions, but much of it also serves increased consumption from the Northeast's industrial and electric generation facilities. Higher natural gas pipeline imports from the United States into the Northeast region meet both higher demand from consumers there and the increased pipeline flows from the Northeast to regions further south.
About three quarters of Mexico's natural gas production comes from associated gas that is produced at Pemex's offshore oil platforms in the South-Southeast region. Natural gas production in the South-Southeast is expected to grow by only 0.4% per year through 2019. Pemex consumes increasing amounts of this production in the near term for its exploration, production, and refining activities. With stagnant growth in the production of associated gas in the South-Southeast and limited capacity for future growth in LNG imports, pipeline imports from the United States become the primary means for Mexico to satisfy national demand growth.
SENER has previously made projections that assumed more robust investment in the development of new gas fields, and a more aggressive and diverse range of well productivity rates. SENER's high natural gas production growth projections included the undertaking of an initiative to enhance recovery rates in the South-Southeast of both gas and oil extracted from offshore fields in the Yucatan Peninsula, as well as development in the Northeast of the Sabinas Basin's La Casita shale gas play and Mexico's portion of the Eagle Ford shale play.
However, there are significant factors that could inhibit the development of shale gas and other basins in Mexico, including the geologic complexity and discontinuity of its shale gas areas, the availability of required technology and water resources, security concerns, and a focus on development of crude oil resources. Even if additional development did occur, Mexico's northern regions would likely still see high growth in pipeline imports from the United States, particularly in areas that lack pipeline connectivity to other parts of the country.
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