EIA

Natural Gas Weekly Update
For week ending August 6, 2014 | Release Date: August 7, 2014 | Next Release: August 14, 2014
 

In the News:
U.S. Gas Exports to Mexico Post Record High, with Further
Gains Expected

 

U.S. natural gas exports to Mexico reached a record high of 2.5 billion cubic feet per day (Bcf/d)
on July 24, averaging 2.3 Bcf/d from June through August and more than doubling since 2010.
This growth is led by higher natural gas demand from Mexico's industrial and electric power
sectors, relatively flat Mexican production, expansions in export pipelines from the United States
and in Mexican pipeline infrastructure, and availability of natural gas supply from the United
States. Mexico's national energy ministry projects that U.S. natural gas exports to Mexico will
double in the next five years, driven primarily by Mexico's growth in gas-fired power generation.


Mexico's demand for natural gas has been growing rapidly in recent years, rising from 5.0 Bcf/d
in 2005 to 6.9 Bcf/d in 2013, with the power generation sector accounting for 76% of that
growth. From 2000 to 2013, the power generation share of total natural gas consumption has
almost doubled, from 24% to 47%, and in the past three years (2011-13), all of the natural gas
demand increase (0.5 Bcf/d) came from the power generation sector. The energy ministry
projects natural gas demand growth of 4.7 Bcf/d between 2012 and 2027, with the power
generation sector accounting for 73% (3.5 Bcf/d) of that growth.


Mexico's domestic production, which contributed 84% of Mexico's total supply in 2005, has
been relatively flat and has not kept pace with rapidly growing demand, accounting for only 63%
of total supply in 2013. Despite Mexico's large shale and tight resource base, its production is
modest compared with the United States and Canada. Recent energy reforms in Mexico may
boost production, although much of any new exploration may target higher–valued oil resources.


Growing natural gas demand in Mexico provides an outlet for increasing U.S. natural gas
production, particularly from Texas's Eagle Ford Shale. In 2013, pipeline export capacity to
Mexico from the United States was 4.2 Bcf/d. In the past two years, however, five export
pipeline expansions in Texas and Arizona came online, increasing U.S. export capacity by 1.4
Bcf/d. Two more projects, totaling 2.3 Bcf/d, are scheduled to come online by the end of 2014.
These include the NET Mexico expansion from the Agua Dulce Hub to near Rio Grand City,
which will connect Eagle Ford to the Los Ramones pipeline and add 2.1 Bcf/d of export
capacity. In addition, there is Kinder Morgan's new Sierrita Pipeline in Arizona, which will have
an initial capacity of 0.2 Bcf/d, expandable to 0.8 Bcf/d by 2016.


Additional export projects have been recently announced, including Energy Transfer Partners's
Houston Pipe Line and Oasis Pipeline facilities (together, 0.9 Bcf/d) and Colombia Pipeline (1.1
Bcf/d), which is a unit of Howard Midstream Energy Partners of San Antonio.


Mexico's domestic natural gas pipeline network is also undergoing major expansion. In the past
two years, 2.8 Bcf/d of new pipeline capacity has been put into service, primarily to
accommodate the expanding natural gas imports from the United States and the growth in
electric power generation. An additional 5 Bcf/d capacity is scheduled to be added to the Mexico
grid by the end of 2014. By 2016, a further 2.2 Bcf/d of new natural gas pipeline capacity is
scheduled to come online, bringing the total 2013-16 capacity additions to 10 Bcf/d.


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DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED
IN THE PRICE OF THE UNDERLYING FUTURES.