US pipe gas to push Mexico’s LNG imports to 10-year low

HOUSTON (ICIS)–As US gas pipelines continue to ratchet up exports into Mexico, total LNG imports into the country are expected to fall to a decade low this year, even as the country shows economic recovery.

Total LNG imports into Mexico are expected to decline to 688,000 tonnes for 2021, down by 61% from the previous year, according to the country’s demand forecast from LNG Edge.

This would be the lowest volume of LNG imported into the country since the country’s third LNG terminal, Manzanillo, opened in 2012.

While gas consumption has rebounded in Mexico this year from last year’s coronavirus-related economic contractions, domestic production is expected to fall further as the country’s incumbent gas producer Pemex continues to face numerous upstream funding challenges.

Instead of LNG, the increase in gas demand has been met by an uptick in gas imports from the US due to increased pipeline connectivity.

US-Mexico pipeline gas flows for the month of May to date have been 6.37 billion cubic feet (bcf)/day, about 30% higher than in May 2020, according to data from Criterion Research.

ICIS estimates show demand in August could spur US-Mexico pipeline flows to reach a record 7.33bcf/day, depending on temperatures that would increase cooling demand.

The start of the Sur de Texas-Tuxpan pipeline, which connects south Texas near to Atlamira, Mexico, displaced LNG imports into the Gulf of Mexico. Connecting pipelines around the southwest of the country near state-run utility CFE’s terminal in Manzanillo also have lowered the need for LNG on the Pacific coast.

The Wahalajara pipeline system, which connects west Texas gas south towards the high-demand industrial region around Guadalajara has not yet been fully utilised, however, likely due to technical issues that remain in parts of the system.

This could potentially support some spot LNG demand into Manzanillo, depending on the extent of demand required at CFE’s power plants near Guadalajara.

SPOT LNG NEEDS

While no LNG has been imported into any of Mexico’s LNG terminals since March 2021, CFE could have the potential to seek spot cargoes next month at either Manzanillo or Altamira, depending on demand, market sources said.

Earlier this year, due to the extreme cold that hit Texas, Mexican imports of US gas were cut off to conserve gas for the state, which led to CFE buying emergency LNG into Altamira and Manzanillo.

CFE bought February and March cargoes into Altamira and Manzanillo following the freeze event.

In Mexico, power generation demand generally peaks in the summer to meet cooling demand.   Ruth Liao