Something is brewing south of the border, and it's gas-fired. Mexico's net import of U.S. natural gas is expected to grow to 267 million cubic feet per day by 2005, totaling 97 billion cubic feet a year, according to the Gas Technology Institute's forecast. The Energy Information Administration projects net imports will grow to 657 MMcf per day, or 240 Bcf a year, by 2020. Mexican energy officials fear the imbalance will be even larger: 2 Bcf per day. The GTI and EIA forecasted deficits are relatively small, in comparison with U.S. demand, which is presently about 60 Bcf per day. But the deficit may have a double effect on the U.S. Mexico cannot be depended upon during these next several years, at least, to supplant U.S. supply; worse, it will create additional pressure on supply. This comes at a time when U.S. supply is already tenuous. Expectations are that working-gas in storage-at about 1.1 trillion cubic feet in mid-February-will not be fully replaced this summer-injection season, and catch-up will be played for several or more years. "Canadian gas solves part of the U.S. supply problem," says John C. Cochener, principal analyst for the Arlington, Virginia-based GTI Baseline Center. "But we have leaks on the southern side, into Mexico." Historically, Mexico has been a net exporter of gas to the U.S. but that scale was tipped in recent years, as the country's own demand has grown and its supply has not. "They're having to pull in gas from the U.S. because where they need it isn't entirely where they've got it," Cochener says. A great deal of production is in the Gulf of Mexico and in the southern part of the country, such as in the Macuspana Basin. The greatest demand growth, however, is along the U.S. border: from increasing numbers of manufacturers, tourist destinations, homes and, especially, gas-fired electricity-generation plants. Mexico's current gas consumption is so small, relatively, that one gas-fired power plant can have an astronomical effect on its gas-demand projections, Cochener says. He and his Baseline Center colleagues expect Pemex to target new reserves in the Burgos Basin in the northeastern corner of the country, just south of Texas. The location of the Burgos, in a growing gas market, is prime. And, it has huge potential. The GTI staff believes it contains more than 65 Tcf of gas, part of the same geologic trend as that which underlies Texas Railroad Commission District 4, a long-time and generous gas producer. The Burgos is an obvious target for another reason: the odds of drilling success are very high-nearly 100% for development wells, and more than 50% for exploratory ones. And, these statistics are based on pre-2000 gas prices; a new definition of success may come with a $5-gas model. Pemex reportedly has allocated more than $2 billion to Burgos Basin gas development. Cochener and his fellow analysts believe Burgos production will be sufficient by 2005 to meet Mexico's domestic gas demand, and will continue to grow, so net U.S. gas imports will begin to decline, eventually to zero by 2015. It is uncertain if Pemex will go further, developing reserves and infrastructure to the point at which net export to the U.S. can be resumed. There is plenty of gas in Mexico, the EIA, GTI and other agencies say. "The basis of the limited success in developing gas prospects in Mexico is more a function of limited capital investment than limited resource," Cochener says. There is good news, for the U.S. service and supply sector: Pemex is likely to outsource a great deal of the Burgos Basin development, from drilling to completion to pipeline construction. That could put greater pressure on rig availability, thus dayrates, while so many rigs are already busy drilling for U.S. gas. Additional pipeline capacity is already under way. Sempra Energy International and PG&E Corp., along with Mexico's Proxima Gas, are building a new 30-inch, 400-MMcf-per-day pipeline to the northwestern corner of Mexico, from an El Paso interconnection in Arizona. It may be in service in 2003, feeding gas to power plants and energy-intensive industries in Baja California. Andres Antonius, the Mexican energy secretary's chief of staff, told energy executives at a Houston conference, "We have a lot of natural gas. We just need to produce it."