Increase in Mexico’s natural gas plans expected to drive demand for U.S. imports

Natural gas-fired power plants account for the majority of power in Mexico, and additions to the country’s energy capacity will likely drive up Mexico’s demand for natural gas, according to an analysis by the U.S. Department of Energy.

The increased demand would open and expand markets for natural gas from Texas shale and pipeline companies. Texas firms such as Kinder Morgan and Spectra Energy, both of Houston, and Energy Transfer Partners of Dallas are developing or expanding pipelines to carry more natural gas to Mexico.

Natural gas generated 54 percent of Mexico’s power in 2015, up from only 34 percent 10 years before. Natural gas is also expected to account for 60 percent of the additions to Mexico’s power grid over the next three years.

As a result, Mexico’s demand for natural gas is expected to greatly increase, and that demand will be largely met by imports from the United States, according to the Energy Department.

Mexico has reformed its electricity market to open it up to private investment and create a wholesale power market, with the aim of reducing electricity costs and switching to cleaner-burning fuels. Mexico relies heavily on fuel oil to generate electricity and is is also trying to make a transition to natural gas, which produces fewer pollutants.  By the end of last year, Mexico had converted 4.3 gigawatts of fuel oil units to natural gas to help meet the government’s goal of a 90 percent reduction in fuel oil consumption by 2018.