In late June, Comisión Federal de Electricidad (CFE), Mexico’s state-owned electric utility, announced approximately ten-billion US dollars’ worth of pipeline and power station projects, most of which are expected to begin operations by 2018. CFE is aiming to reduce electricity prices for Mexican consumers in light of rising electricity demand and stagnant domestic fuel production.
The largest of the projects is a $3.1b, 500 mile-long subsea pipeline spanning from southern Texas to the port of Tuxpan, in the Mexican state of Veracruz. The pipeline would have the capability to transport up to 2.6 billion cubic feet of natural gas per day (Bcf/d). This is similar in export capacity to the Sabine Pass liquefied natural gas (LNG) export terminal, which is slated to begin exporting up to 2.7 Bcf/d within a year.
Mexico has already been receiving increasing volumes of natural gas from the US. In 2015, monthly pipeline imports are up 25% year-over-year. Mexico’s energy ministry, Secretaría de Energía de México (SENER), projects this trend to continue.
In 2013, pipelines transported natural gas to Mexico at an average rate of 1.8 Bcf/d, and SENER projected this figure would more than double to 3.8 Bcf/d by 2018. Timely completion of the Texas-to-Veracruz pipeline would certainly allow this projection to become reality.
For Mexico, pipeline-based imports are significantly cheaper than LNG imports from other nations, and help the country sidestep challenges of developing additional fuel production on home soil.
This pipeline will add to the list of the US’s natural gas export facilities expected to begin operating in the 2nd half of this decade. Increased exports are a bullish factor in the natural gas marketplace, but the real effect on prices is yet to be seen as US producers continue to produce the fuel at a record pace.
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