As We Send Gas Through the Streets of Laredo—A Tex-Mex Gas Update

Natural gas exports to Mexico are on a tear, and there’s every reason to believe the market will continue to grow. In essence, parts of the Eagle Ford and Permian Basin are becoming the go-to fuel source for new power plants and industrial facilities south of the border, as evidenced by a Howard Energy Partners plan to build new, connecting pipelines to deliver large volumes of gas directly from South Texas to emerging demand centers in and around Monterrey, Mexico. Howard’s also been addressing some of Texas’s gas gathering and processing needs. Today, we consider the latest plan to add gas pipeline capacity across the Rio Grande.

Despite Mexico’s long-term potential as a world-class natural gas producer, the U.S.’s vecino del sur (that’s “southern neighbor” to our monolingual readers) is becoming increasingly dependent on Texas, New Mexico and Rockies gas to meet its fast-growing requirements. As we said in The Gas All Went to Mexico—Moving Gas South of the Border, Mexico’s most promising shale plays (the Burgos and Sabinas basins just south and west of the Eagle Ford) are said to be geologically complex (in other words, tough to figure out from a gas-extraction perspective). These areas also lack the road and water infrastructure that development would require, and (thanks to drug-cartel gangs) they can be pretty risky places to do business. So for muchas mañanas to come, U.S. gas producers will be playing a critical role in supplying the fleets of new gas-fired power plants that the Comisión Federal de Electricidad (CFE, Mexico’s state-owned electric utility) and independent power companies are building and planning.

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Mexico’s appetite for imported gas has been growing even more quickly than many had predicted; according to the U.S. Energy Information Administration (EIA), U.S. producers sent an average of 2.57 Bcf/d south of the border in March 2015 (the latest month for which those figures are available), up 37% from the 1.87 Bcf/d exported in March 2014. (According to a published report, Mexican imports spiked to 3.4 Bcf/d on June 12, 2015 --57% higher than the 2.17 Bcf/d average in June 2014—and it’s widely expected that deliveries of U.S. gas to Mexico will surpass 4.5 Bcf/d over the next few years.) Seems like Mexico can’t build new capacity from the U.S. quickly enough; as soon as a new pipeline comes online, it gets filled and U.S. gas export levels ratchet up to another new high. (Kinder Morgan’s new Sierrita Lateral from near Tucson, AZ to the Mexican border being a recent example.) That brings us to Howard Energy Partners (HEP), which has been artfully assembling a gas gathering, processing and transmission network that—with HEP’s latest plan—will extend deep into northeastern Mexico’s state of Nuevo León, whose capital is Monterrey (Mexico’s third-largest city).

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