I Feel It Coming - Natural Gas Exports To Mexico Swell, But Is a Tidal Wave Coming?

For some time now, natural gas producers in the Permian and the Eagle Ford have been counting on rising pipeline exports to Mexico to help absorb a lot of the incremental production in their plays. Their hopes have been bolstered in the past couple of years by the build-out of a number of new pipelines from the Waha and Agua Dulce gas hubs to the U.S.-Mexico border. Gas pipeline development south of the border hasn’t kept pace, though, mostly due to regulatory and construction delays. Also, a recent dispute over tariffs on a newly completed large-diameter pipeline, extending from the southern tip of Texas to key points along Mexico’s Gulf Coast, had left the pipe sitting empty this summer. That tiff has since been resolved and gas is flowing on the new pipeline, allowing those piped southbound exports to hit a daily record high near 5.9 Bcf/d earlier this month and average above 5.5 Bcf/d this month to date. Plus, progress is being made on other planned Mexican pipes too. This all leads us to ask, is the long-promised surge in U.S. gas exports to Mexico just around the corner? Today, we look at the latest developments regarding Mexico’s natural gas pipeline infrastructure additions.

We’ve covered the natural gas pipeline infrastructure build-out in Mexico from almost every angle, from initial planning to pipeline-by-pipeline reviews, to a look at Mexico’s increasingly open gas market. Today, we’ll provide an overdue update, including a discussion about what’s been happening with one of the biggest long-haul pipeline additions: TC Energy and IEnova’s 2.6-Bcf/d Sur de Texas-Tuxpan Pipeline (STP), whose in-earnest start-up was set back for months by a stand-off between the Mexican government’s then-new administration and the project’s developers over the pipeline’s rates — the government said they were too high, and TC Energy and IEnova said a deal’s a deal. (More on this in a moment.) First, let’s take a big-picture look at the current status of gas pipeline development down Mexico way.

Probably the most important new pipeline infrastructure in Mexico, certainly as it relates to moving more gas from West Texas, is the Fermaca network of pipelines that is being built from the border to Central Mexico. As we covered in Before The Deluge, the first part of this network has been finished to El Encino in the state of Chihuahua and includes the Tarahumara Pipeline (yellow line in Figure 1), which is supplied largely by the Roadrunner Pipeline (orange line) from Waha to the border. While the Roadrunner-Tarahumara combination can move volumes south to El Encino, moving gas from there further south into Mexico won’t be possible until three additional pipelines are completed to Central Mexico (dashed black and yellow lines). The first of those is the El Encino-to-La Laguna Pipeline, which will supply power plants near the cities of Torreon and Gomez Palacio (labeled “La Laguna-area” in Figure 1) and also supply gas to the La Laguna-to-Aguascalientes Pipeline. Volumes on that pipeline will go to serve demand near Aguascalientes and to supply the Villa de Reyes-to-Aguascalientes-Guadalajara Pipeline, which interconnects new and existing power plants and pipelines in Central Mexico.