Mexico's declining natgas production increases dependency on US imports

Mexico's declining natural gas production is reflected in falling injections to the SISTRANGAS pipeline system, as well as a bottleneck in ammonia and ethylene production, according to a new ministry of energy report.

Pemex's natural gas processing stations were working at 41% in 2018, down from 62% in 2014.

The decline in natural gas production has been compensated by imports from the United States, particularly through the Ramones pipeline. In September, Mexico imported 4.9Mf3/d of natural gas and 933,000f3/d of LNG, while producing 2.7Mf3 of natural gas domestically.

Due to the dependency on natural gas imports from its neighbor, Mexico's prices reflect price swings in the US. Rising prices in the Houston Ship Channel and Henry Hub between July and October drove an 11% price increase in Mexico's IPGN reference to US$4.33/Mbtu in September.

The ministry of energy expects GNL imports to decline as new infrastructure such as Transcanada's Texas-Tuxpan pipeline comes online.

The report shows a sharp disjunction in scenarios of wet, bitter gas production from Pemex Exploración and Producción, with the upper limit for 2019 pegged at 4.4Mf3/d and the lower limit at 3.3Mf3/d.

Natural gas demand in Mexico increased 11% year-on-year in August.