Despite the trend of falling natural gas production and a deficiency of existing supply for industry and the power sector, Mexico is planning to construct two gas liquefaction plants with three existing regasification facilities being considered for conversion to export as well. These moves anticipate the additional supply to result from ongoing energy reform, and the price differential available in Asian energy markets, said Javier Estrada, partner with Mexico-based Analitica Energetica.

However, until reform rejuvenates investment in natural gas production, Mexico will have to rely on up to 5.5 billion cubic feet per day (Bcf/d) of imports from the U.S., he said.

“Natural gas demand is growing, but the country is lagging behind in natural gas production,” Estrada noted. “There are very large 3P (proved, probable and possible) reserves and plenty of shale gas resources, so it’s possible to start see increasing natural gas production in Mexico, but first it’s going to be natural gas (imports) from the U.S.”

Estrada, the immediate past director for energy planning and information with Mexico’s department of energy SENER, spoke at Hart Energy’s North America LNG Exports conference on Nov. 20.

In early November, Pemex, the formerly state-owned oil and gas monopoly, announced it is planning a $6-billion investment to construct an LNG export facility at Salina Cruz, on the Pacific Coast and at the narrowest point of the Tehuantepec isthmus, with shipments aimed for Asia. A planned pipeline traversing the 120-mile isthmus would connect gas production offshore Gulf of Mexico and from southern Mexico to supply the plant. The project will have capacity of 250 MMcf/d, with first delivery expected in 2020.

Another LNG plant proposed in Topolobampo, further north, would primarily supply the Baja California peninsula with natural gas to replace the fuel oil and diesel currently used for power generation.

Three other existing regasification plants—Altamira, Ensenada and Manzanillo, with more than 2 Bcf/d regas capacity—are pondering reversing shipments by adding liquefaction capacity to take advantage of the anticipated increased gas production.

Lower natural gas prices have dampened Pemex’s motivation to explore for new non-associated gas fields, focusing solely on crude production opportunities instead, Estrada said. Mexico gas production has dropped by 1 Bcf/d since 2008, to 4.5 Bcf/d, while imports have doubled to 2 Bcf/d.

“We have not properly developed out natural gas resources,” he said.

Meanwhile, domestic power generation is driving increased gas demand, representing 47% of domestic energy production currently as it transitions from more expensive fuel oil, and projected to grow to 78% by 2028, “which is a lot. That presents a new kind of challenge.”

Yet Mexico recognizes it has ample natural gas resources, some 35 Bcf 2P and 63 Bcf 3P reserves, particularly in giant deepwater gas fields in the Gulf of Mexico, and onshore nonconventional resources. Energy reform will unlock this treasure, Estrada said, with several blocks ripe for development offered in Mexico’s inaugural leasing rounds through 2015.

“Energy reform was necessary to attract outside investment and technology. All these [lease packages] are primed for development, and are the next step to see if we can produce natural gas.”

Estrada said Mexico is targeting natural gas production to increase to 8 Bcf/d by 2018 resulting from these lease blocks and farmouts, offered to private and foreign companies for the first time in 75 years.

Mexico shale gas will take longer to develop than the offshore fields, he said.

“We still have to see if we have the resources available like the U.S., and the culture and the way we’ve built our energy industry is not at all like the U.S. It’s going to take some years while we develop the types of companies and supplies that are needed, but in the next years we will absolutely see two or three developments.”

He added, “Mexico’s shale gas resources will play a key role to cover long-term supply requirements.”