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Are Energy Stocks Still Somehow Cheap?

Are Energy Stocks Still Somehow Cheap?

Energy stocks are outperforming the…

Mexico Will Depend On U.S. Natural Gas Despite Energy Sovereignty Push

Mexico will continue to need U.S. natural gas imports over the next decade, despite efforts by the new Mexican government to reduce dependence on American natural gas, data and analytics company GlobalData said in a report on Tuesday.  

Currently, U.S. natural gas pipeline exports, mainly from Texas, look like a much more convenient option for Mexico than grappling with possible shortfalls of natural gas supply, according to GlobalData.

“Without a comprehensive strategy that considers development of large natural gas resources, both onshore and offshore, it will be difficult to reduce the volume of imports demanded for power generation and industrial use,” the analytics firm said.

The Mexican government’s approach to domestic resource development would make it difficult for the country to reduce its energy dependence, because state-owned oil and gas firm Pemex has the dominant position over much of Mexico’s gas reserves, but lacks the capital to work by itself on capital-intensive gas development projects, GlobalData said. In addition, resource development could be further constrained because the Mexican government has halted the bidding rounds for the time being.

Mexico is looking for ways to reduce its overwhelming dependency on U.S. natural gas imports, which currently satisfy over 50 percent of its demand. This is the highest foreign gas dependency rate in the world, according to a senior adviser to Mexico’s president Andres Manuel Lopez Obrador.

“In the short and mid-term, Mexico’s natural gas production decline could be alleviated by developing key upstream projects but this is unlikely given the current strategy led by the Mexican government,” GlobalData noted.

At the same time, U.S. natural gas pipeline exports to Mexico have been growing, thanks to expansion of cross-border pipeline capacity, the EIA has estimated

The rise of liquefied natural gas (LNG) exports and pipeline exports to Mexico resulted in the United States being a net natural gas exporter for the second year in a row in 2018. Exports of natural gas to Mexico by pipeline exceeded 5 Bcf/d in July 2018, the EIA said earlier this year.

By Tsvetana Paraskova for Oilprice.com

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