Natural Gas Pipeline About to Boost U.S.-Mexico exports by 20%
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A single pipeline project in Mexico is poised to expand U.S. natural gas exports in a big way.
The Los Ramones Phase II line, which state-owned Petróleos Mexicanos is developing, is projected to boost U.S. gas deliveries south of the border by about 17 to 22 percent, according to Bloomberg New Energy Finance. Pemex has said the system may begin service this month.
The Los Ramones project will add to the flood of gas heading to Mexico as producers in the lower 48 states seek new markets for a glut of supply from shale formations. U.S. gas futures have rebounded from a 17-year low on speculation that exports and a drilling slowdown will prevent stockpiles from rising to a record before the winter.
The deregulation of Mexico’s energy market has made it easier to develop pipeline projects, boosting demand for U.S. natural gas, said Jacob Fericy, an analyst at BNEF in New York. Power plants in Mexico are increasingly switching to the fuel from oil, he said.
“The recent changes are allowing infrastructure like these pipelines to come into place in the most efficient way possible,” Fericy said. “A lot of pent-up industrial demand for gas is being fulfilled.”
Los Ramones II may begin operations sometime this month, Jorge Martinez, Pemex’s interim director of industrial transformation, said on a conference call last week. The company didn’t immediately respond to a request for comment. Analyst reports indicating the pipeline started up in late March weren’t accurate, according to Rick Margolin, senior natural gas analyst at Genscape Inc. in Boulder, Colorado.
The U.S. sent 98.8 billion cubic feet of gas to Mexico in February via pipeline, or about 4.3 percent of total marketed production, according to the U.S. Energy Information Administration. That’s more than double 2012 levels for the time of year.
Gas futures on the New York Mercantile Exchange have slid 10 percent so far this year. The June contract rose 4.9 cents, or 2.5 percent, to $2.091 per million British thermal units at 10:53 a.m. local time.
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