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US gas exports to Mexico on the rise, further growth expected

May 24, 2013
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Amid questions regarding a potential increase in exports of liquefied natural gas (LNG) from the United States, new research from Barclays reveals that gas exports to Mexico have doubled over the past three years. Mexico's natural gas production fell 11 percent over the same period, according to Barclays analyst Biliana Pehlivanova. The analysis shows that associated gas production was on the rise but this was offset by the drop in nonassociated gas, Oil and Gas Journal reported.

Exports of U.S. gas to Mexico should continue to grow at a substantial rate. In 2013, exports are expected to reach two billion cubic feet per day (bcfd), but next year projections are for 2.2 bcfd. In the years beyond 2014, growth is expected to speed up further as more Mexican pipeline capacity will be put in place, the analysis states. This rapid increase in exports will be fueled by a rise in demand for U.S. gas and will be facilitated by further capacity expansion, Pehlivanova commented.

Mexico itself has abundant shale gas deposits which, according to estimates from the U.S. Department of Energy, are only outstripped by those of China, the United States and Argentina. However, the country lags behind other nations in developing these resources, mostly because its legislation hampers access to reserves. Unless Mexican laws are changed to grant access to researchers and developers, the country will be able to make little use of its shale gas deposits, Pehlivanova noted.

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According to state-owned power generator Comision Federal de Electricidad (CFE), Mexico needs almost 20 Gw of gas-fired generation capacity to be developed between 2010 and 2024, but generating this would require an additional supply of 3.8 bcfd, she estimated. Moreover, power generation is not the only sector that is going to need increased amounts of gas, the analysis from Barclays revealed.

In an attempt to provide the necessary infrastructure for export growth, Mexico is planning to build a number of cross-border pipelines. Petroleos Mexicanos is expected to present bidding rules for a section of the Los Ramones pipeline project, following the previous assignment of two sections. The pipeline will be 600 miles in length and will carry 2.1 bcfd from southern Texas to the state of Guanajuato in the central part of the country, which is Mexico's auto industry hub. The pipeline will start at the border and will be complemented by a 125-mile pipeline on the U.S. side, running from Agua Dulce, near Corpus Christi, to McAllen, Texas. According to RBN Energy LLC, the pipeline project will cost the Mexican side about $3 billion and the U.S. project will require between $650 million and $750 million in investment. Los Ramones is just one of several pipelines that are planned to start operations over the next few years, further bolstering U.S. gas exports to its southern neighbor, Pehlivanova concluded.

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