S&P Global Offerings
Featured Topics
Featured Products
Events
S&P Global Offerings
Featured Topics
Featured Products
Events
S&P Global Offerings
Featured Topics
Featured Products
Events
Solutions
Capabilities
Delivery Platforms
News & Research
Our Methodology
Methodology & Participation
Reference Tools
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Featured Events
S&P Global
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
S&P Global Offerings
S&P Global
Research & Insights
S&P Global
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
About Commodity Insights
Solutions
Capabilities
Delivery Platforms
News & Research
Our Methodology
Methodology & Participation
Reference Tools
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Featured Events
S&P Global
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
S&P Global Offerings
S&P Global
Research & Insights
S&P Global
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
About Commodity Insights
S&P Global Offerings
Featured Topics
Featured Products
Events
Support
LNG, Natural Gas
November 26, 2024
By Killian Staines and Sheky Espejo
HIGHLIGHTS
Mexico highly dependent on US flows
Canada-US flows at highest since 2016
Trade flows of natural gas between the US and Mexico are unlikely to be affected by the prospect of tensions between the two countries, experts told S&P Global Commodity Insights.
The threats made by President-elect Donald Trump over social media are more likely to be a bargaining chip in negotiations to get Mexico to do more in the prevention of illegal migration in its southern border and curve the imports of drugs, particularly fentanyl, experts said.
Natural gas flows by pipeline from the US to Mexico are guaranteed by long-term contracts and are seen to be under no threat by changing policies, said Arturo Carranza, head of energy projects at consultancy Akza Consultores in Mexico City.
"The US and Mexican energy markets are very linked. It is unlikely the US government will do something to derail that relationship, as it would also hurt US companies," Carranza said. "I am sure Trump's team knows the level of integration of the energy markets of both countries and knows that they are complementary for each other," he said.
US gas exports to Mexico have risen sharply in the past ten years, and strong growth is expected to continue out to 2029 as Mexican domestic demand continues to grow, and as LNG projects to reexport US gas gather pace.
Net flows so far in 2024 have averaged 6.39 Bcf/d, up from the annual record 6.14 Bcf/d in 2023 and just 1.99 Bcf/d in 2014, Commodity Insights data showed. Considering that Mexico's meagre domestic production is reused by Pemex in its operations, the power industry and vast areas of the industry depend completely on imports.
In their latest short-term outlook released Nov. 22, Commodity Insights analysts forecast exports to rise more than 35% from 2023 to 2029, because of "the growth in Mexican power and industrial demand, the startup of three LNG export facilities and ongoing difficulties in ramping up domestic supply." Mexico could export almost 1 Bcf/d of LNG by 2029, the forecast said.
There is a risk that new tariffs could cause changes in contracts, which could affect prices, but this is unlikely as it would affect the interests of an industry that was crucial to Trumps victory, said David Rosales, managing partner at consultancy Elevation Ideas in Mexico City. "And even if prices did go up, demand for natural gas in Mexico is very inelastic," Rosales said.
Most US exports to Mexico flow through Texas. If tariffs led to reduced exports, this could limit an important market for Permian Basin producers, who have already been struggling with extremely weak prices as pipeline capacity struggles to match pace with rapid production growth. While most exports flow from South Texas, exports from West Texas have picked up markedly in recent years; they averaged 1.8 Bcf/d so far in 2024, up from less than 800 MMcf/d in 2020, Commodity Insights data showed.
The Canadian and US gas markets are also highly interconnected. Net exports from Canada to the US have averaged over 5.7 Bcf/d during 2024, the highest since 2016, although this could be the high-water mark for the decade regardless of tariffs.
LNG Canada Phase 1 is now receiving small volumes of feedgas and is expected to ramp up through 2025, Commodity Insights analysts said Nov. 22. "The initial surge in LNG feedgas demand is projected to exceed Western Canadian production, leading to a decrease in pipeline exports."
If tariffs were to make Canadian exports more expensive, the Western US states could face higher prices. The majority of Canadian exports flow to the Pacific Northwest, with much of it then flowing further south to California. Western states, especially California, are already typically premium markets because of limited pipeline supply options.