Gas pipelines, LNG seen as safe haven for energy investors in Mexico

Even as investor doubts grow about Mexico’s shifts toward greater power generation by state utility CFE, long-term demand trends continue to spell opportunities for natural gas projects in the country. 

“We believe natural gas development projects, and pipeline services, are the most attractive investment opportunities right now. These projects, and the related services, are highly visible and vital to the manufacturing industry in Mexico,” Kijana Mack, director at Mexico Energy Partners, told BNamericas. 

The relative stability of natural gas projects stands in contrast to the wider power market, where energy analysts increasingly view President Andrés Manuel López Obrador (AMLO) as backing regulatory changes in a bid to disadvantage private sector power firms. 

“We also think that the natural gas pipeline projects will be relatively insulated from the regulatory changes we’ve seen recently,” Mack said.

Since AMLO announced new transit fee rates between CFE and private gas companies last September, gas pipelines have begun bringing ever greater volumes of US natural gas into Mexico largely free of political interference. 

Natural gas transported in other forms could also be a niche market.

In May, Daniela Flores, head of midstream and downstream at Talanza Energy, estimated there was slightly less than 1Bf3/d (billion cubic feet a day) of unmet demand in the Yucatán Peninsula. Such regional shortages spell an opportunity for “more small to medium-scale LNG and CNG projects” in Mexico, she said. 

Now another niche opportunity may be opening up, thanks to US regulatory changes: LNG imports to Mexico via rail. 

On Friday, the US transportation department approved use of cryogenic rail cars, with safeguards, for LNG transport. 

Regulatory approval would be needed for Mexico to receive LNG via rail, but already US firms are considering it. 

In the wake of the US announcement, Jim Reddinger, CEO of Houston-based Stabilis Energy, floated the idea of outfitting railcars for LNG exports, according to the Houston Chronicle. Such a configuration would allow Stabilis to service its growing industrial client base around Monterrey. 

In an interview with the paper, Caio Zapata, CEO of Mexican LNG firm Enestas, said there was “solid demand” for LNG in Mexico, and that generally Mexican regulators mirrored US decisions. However, COVID-19 could lead to authorization delays for LNG via rail.  

“Now the question is how long it will take” for Mexico to follow suit, Zapata said.