Based largely on new power generation capacity, Mexico’s demand for natural gas is expected to increase by 3.2 billion cubic feet per day (Bcf/d), according to analysis provided during a recent Platts-Bentek Energy Summer Webinar Series.
U.S. exports, mostly from the Eagle Ford, Anadarko and Permian basins, will supply about 3.5 Bcf/d to the nation through new export capacity, said Jim Kahler, a senior analyst at Bentek Energy.
Ross Wyeno, also an analyst at Bentek, added that power demand in Mexico is expected to grow from 2.5 Bcf/d today to 6 Bcf/d in 2019.
As Kahler explained, energy reforms working through the Mexican government are expected to open the U.S.-Mexico relationship. But Mexico still has work to do for its grid to meet the needs of its people. Pemex, the national oil company, has heavily subsidized the Mexican government. As its production has slowed, so has revenue to the treasury. Depending on the year, between 35% and 40% of Mexico’s revenue comes from Pemex.
“Fewer exports mean less revenue,” Kahler said. “And these reforms are more than just deregulation.”
Specifically, the reforms will bring about new markets and new regulations impacting all sectors of energy development in Mexico. Just on the midstream side, the nation has roughly 6,000 miles of pipeline. Mexican President Enrique Peña Nieto wants to triple that figure.
By the middle of next year, many of the new regulatory bodies governing the new system of energy law will take have taken shape, but Kahler said initial bidding for contracts will likely drag into 2016. And, he said, it’s doubtful that Pemex will actually increase its production during its reformation process.
Because Mexico desperately needs the revenue the first rounds will likely focus on offshore deepwater contracts, he said.
“There is great potential for oil and gas in Mexico, but predicting it is extremely difficult,” Kahler said, based on the regulatory work left to be done.
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