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The plummeting natural gas exports from the United States to Mexico amid an Arctic cold spell in the country that has led to a gas demand surge is causing blackouts in northern Mexico, with some 4.77 million households and businesses left without power on Monday.
Argus noted that most of the natural gas Mexico receives from the United States comes from the Permian, where the production of both oil and gas has been affected by the cold weather that has caused power outages across Texas.
Oil wells are being shut down, and so are refineries along the Gulf Coast, Reuters reported earlier today, adding oil and gas pipeline operations were also disrupted by the weather.
The blackouts, Bloomberg reports, will strengthen the government’s argument that Mexico needs to be less dependent on energy imports, with President Andres Manuel Lopez Obrador spearheading the drive to reduce this dependency. Obrador wants to boost Mexico’s domestic oil and gas production to tackle the problem, but this has proved challenging without the participation of private energy companies as the president seeks to fortify the dominant status of state energy major Pemex.
The president is also seeking to reinforce the dominance of the state electricity utility, CFE, by proposing a bill that will prioritize CFE’s electricity over private electricity providers, obliging the grid operator to buy from CFE first. The bill follows a policy published by the energy ministry last year to the same effect.
The policy caused an outcry from private companies, many of which have invested billions in solar and wind power capacity. The energy ministry said that prioritizing electricity from CFE ensured the reliability of the grid, but Mexico’s antitrust regulator disagreed and took the case to the Supreme Court. The court ruled the prioritization of CFE over private suppliers was unconstitutional. Now, many expect that Obrador’s bill will also end up in the Supreme Court.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com