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Tourism Is Forcing Mexico To Build Another Natural Gas Pipeline

Mexico plans to shortly launch a tender for the construction of a natural gas pipeline between the Tuxpan port on the eastern coast to Cancun and Merida on the Yucatan peninsula, Mexican President Andrés Manuel López Obrador said at his regular news conference on Wednesday.

The new natural gas pipeline is aimed at improving electricity generation in the popular tourist cities in the area, including Cancun, according to Mexico’s president.

Mexico’s natural gas demand rises with more natural gas-fired power plants, but the country’s gas production cannot keep up with growing demand. Mexico imports a lot of natural gas from the United States, with American natural gas exports to Mexico at a record high.

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The U.S.-Mexico natural gas trade is dominated by pipeline shipments from the United States and Mexico. U.S. natural gas exports to Mexico totaled 2,090 billion cubic feet (Bcf) last year, of which 90 percent was sent through pipelines south of the border, according to EIA estimates. Mexico was also the second-largest destination for U.S. exports of liquefied natural gas (LNG) last year, second only to South Korea.

Leftist Mexican president López Obrador aims to reduce the country’s dependence on imports. But according to analysts, Mexico will still need a lot of natural gas imports, especially in light of the president’s pivot to give state oil firm Pemex more control over oil and gas production, while slamming the energy reforms of his predecessor Enrique Peña Nieto, who had opened in 2013 the sector to private investment for the first time in seven decades.  

Related: The Natural Gas Nation Every Exporter Is Targeting

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In August, Mexico and several private energy infrastructure companies reached an agreement to resolve a dispute over contracts for natural gas pipelines that the previous Mexican administration had signed.

In June, López Obrador said that the natural gas pipeline contracts that the previous administration had signed were ‘abusive’ and ‘unfair’ to the Mexican state, raising additional concerns as to whether the new administration would respect previously signed energy deals.  

By Tsvetana Paraskova for Oilprice.com

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