Texas natural gas exports to Mexico hit a record but a regional shortage may loom
Energize Weekly, August 24, 2022
West Texas natural gas exports to Mexico reached a record in May, but the combination of growing Mexican exports and new Gulf Coast liquified natural gas (LNG) terminals could leave the region short on gas within the next five years without new pipeline capacity.
Natural gas pipeline exports from West Texas to Mexico averaged 1.6 billion cubic feet per day (Bcf/d) during May 2022 – the most pipeline exports from West Texas on record, according the U.S. Energy Information Administration (EIA).
That was 12 percent more than the average for the first five months of the year and is part of a trend that has seen a doubling of exports to 1.2 Bcf/d in 2021 from 0.6 Bcf/d in 2019, as more pipelines to Central and Southwest Mexico were placed in service.
“The availability of relatively inexpensive natural gas from the United States has shifted Mexico’s natural gas supply mix,” the EIA said. “The share of Mexico’s natural gas supply met by pipeline imports from the United States grew from 61 percent in 2019 to 72 percent in 2021, but it has declined to 69 percent in the first seven months of this year as a result of rising U.S. natural gas spot prices,” the EIA said.
During the past two years, there have been increased flows of natural gas from both the Permian and Eagle Ford basins, but the demand for Texas gas is set to rise in the future as three LNG facilities may be expanding.
“With three U.S. LNG facilities making progress and the potential for new export demand in Mexico, the South Texas region could become short gas within the next five years without new pipeline infrastructure,” according to industry analyst BTU Analytics.
Cheniere Energy Partners, which operates an LNG terminal in Corpus Christi, is planning a 1.5 Bcf/d expansion, and two Brownsville export facilities – Texas LNG and Rio Grande LNG – have announced pipeline agreements that could indicate future plant expansions, according to BTU Analytics.
“That demand alone is enough to upset the balance in South Texas, but the imbalance between supply and demand could be further exacerbated by new demand in Mexico,” the analysis said.
New Fortress Energy has signed an agreement with Mexico’s CFE to build an LNG export hub while TC Energy announced a deal to build a new 1.3 Bcf/d pipeline to serve demand in Southeast Mexico. Both projects would likely source gas out of South Texas.
“While additional supply could likely be sourced from further up the Gulf Coast, South Texas demand will have to compete with LNG facilities in South Louisiana for limited supply,” BTU Analytics said. “Without significant growth in the Eagle Ford or the addition of a new greenfield pipeline, South Texas could be left short gas with significant impacts.”