Natural Gas Exports: A Win for U.S. and Mexico
America’s natural gas revolution has generated many benefits. One that’s often overlooked is helping ease Mexico’s energy supply shortage. As the U.S. moves toward becoming a net exporter of energy, the flow of natural gas to its southern neighbor is already producing benefits for both sides.
Pipeline exports from the U.S. to Mexico doubled between 2009 and 2013 as the U.S. has stepped in to make up for Mexico’s natural gas deficit, produced in large part by their strong economic growth. Mexico’s Energy Secretariat projects its GDP will grow another 3.6 percent in 2016, and the U.S. Department of Agriculture’s Economic Research Service predicts that Mexico’s GDP will grow 58 percent by 2030.
Economic growth means increased electricity consumption and more than half of the total demand for natural gas in Mexico is coming from the electricity sector. Mexico’s Energy Secretariat projects that the growth in demand for electricity will accelerate to an average annual rate of 4.4 percent through 2028. Further accelerating demand for natural gas is Mexico’s plan to reduce the use of fuel oil for power generation to only 10 percent of 2012 levels by 2017, mostly in favor of natural gas.
Mexico’s manufacturing industry also benefits from a shift toward American gas imported via pipeline. Because natural gas prices in Mexico are linked to U.S. trading hubs—a legacy of the historic reliance on natural gas imports from the U.S.—price declines stemming from increased American natural gas production has benefitted Mexican gas consumers. Expanding pipeline capacity and installed capacity of natural gas fired generation will augment these benefits for Mexico while resulting in a growing market for American natural gas exporters.
Pipeline capacity into Mexico continues to expand. Pipeline expansions from the U.S. to Mexico in 2014 add 2.7 billion cubic feet per day (BCF/d) of capacity, bringing the total U.S. export capacity to Mexico to 8.5 BCF/d. Capacity will rise in the coming years, as several companies are already making investments to advance pipeline expansions into Mexico, including Energy Transfer Partners, Sempra Energy, Kinder Morgan and Pemex. These investments create jobs and economic activity on both sides of the border and could bring as many as 40,000 jobs to South Texas alone.
Given the projections for pipeline expansions, the current investments in pipeline additions, and the interest in increasing imports from the U.S. shown by the Mexican government, America’s Natural Gas Alliance (ANGA) considers a recent projection from the Energy Information Administration, the statistical arm of the U.S. Department of Energy, of 1.3 BCF/d in 2020 and 6.3 BCF/d in 2040 to be low. ANGA believes that a more accurate projection is an increase of U.S. pipeline exports to Mexico of 4.0 BCF/d by 2020 and 7.0 BCF/d by 2040.
Erica Bowman is vice president of research and policy analysis at America’s Natural Gas Alliance.