Mexican Gas Industry Faces Rocky Road: Regulator
Mexico’s National Hydrocarbons Commission (CNH) said September 20 the country’s gas industry faces significant challenges to increase domestic production and reduce expensive imports.
In a 189-page document, the regulatory agency details the present state of the country’s natural gas industry, while looking ahead at looming challenges and potential opportunities in the short, medium and long-term.
Over the course of the last decade, Mexico’s natural gas production has decreased while demand has increased. The result has been a record surge in natural gas imports from the US, which the report discusses at length.
“In the period from 2010-2017, the average annual decline rate for natural gas production was 4.7%,” CNH notes. “However, in 2017, the national production of natural gas was 4.24bn ft3/day, 13% less than the year prior.”
“Due to the decreased production of natural gas (33% from 2010-2017), natural gas imports have increased in a constant way, reaching 4.92bn ft3/day,” the report said. “Imports have tripled in the period from 2010-2017, highlighted by a growth of approximately 72% between 2014 and 2017.”
For Mexico to satisfy its domestic gas demand and cut imports, the CNH and the country’s energy ministry (Sener) calculate that production would need to increase by an annual average rate of 14% from 2017-2030. That would require a 374% increase in production from 2016, CNH says, but acknowledges such a feat “seems difficult to achieve.”
The report concludes with 26 proposals to improve the future of the natural gas industry in Mexico, led by the development of shale gas, which the CNH says will be vital in boosting the country’s natural gas production. One way to achieve that, the document said, would be to create a state-owned entity focused exclusively on developing Mexico's non-associated gas resources.
Mexico’s first-ever shale bid round is scheduled for February 2019, but in early August, incoming president Andres Manuel Lopez Obrador (Amlo) announced he would cancel the auction. To date, the auction continues as planned, though only two companies have registered to bid for nine fields in the northern Burgos basin.
“As it has been documented, the country has important resources of natural gas in unconventional fields, which represent 65% of the total prospective resources, principally located in the north of the country,” the CNH report says. “The production of natural gas in Mexico depends on the successful development of unconventional fields.”
The report goes on to recommend that Mexico accelerate the pace of bid rounds to develop these resources. This contrasts with the plans of Amlo and his energy team to pause new auctions for as many as two years after taking office on December 1.
“Fortunately, the existence of reserves and considerable prospective conventional and unconventional resources of gas in Mexico provides an opportunity to strengthen the energy security,” the report says. “For that, it is necessary to make use of all the tools available to promote the growth of gas production in the country.”
The full Spanish text of the report can be found here.