U.S. producers will be increasingly called upon by Mexico to help satisfy the country's growing need for natural gas-at a time when U.S. demand itself is increasing and production is in decline. Mexico has been a net importer of U.S. gas in each of the past four years. "I look at Mexico as a market for us now," Texas Railroad Commissioner Charles Matthews told producers at a recent ADAM Energy Forum luncheon in Dallas. Mexico paid an average $4.35 per million Btu in 2001 for U.S. gas, and imports in June 2002 were 138% more than in June 2001. "We expect 1 billion cubic feet of gas per day coming from [Texas] in 2006," Matthews said. But further out, the gas flow will change direction. "Texas will not be able to meet Mexico's demand. Within four or five years, we'll see the trend reverse and we'll begin importing gas from Mexico." And, obviously, "Mexico is very interested in that occurring." The country is hoping outside E&P companies-via contracts to be let this year, if allowed by Mexico law-will help boost domestic gas production, restoring the country's historical status as a net gas exporter. (For more on this, see "Mexico's New Upstream Philosophy," September 2002.) Meanwhile, the country is having to buy natural gas, and at higher-than-historical prices, when in the past the sale of its excess gas has been a source of revenue. And, the country's pressure on U.S. supply will help continue to prop prices. "What has saved us [with gas supply] has been the Canadians," Matthews said, but "the Canadians have said they will not be able to continue to do that." The northern neighbor is also experiencing increasing demand and its domestic production is beginning to plateau. Matthews is expecting Mexico to again be a net exporter of gas to Texas, after 2006, providing the state with additional supply. -Nissa Darbonne
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