MIDLAND, Texas—Mexico could have a bright future as a key net importer, while still being an exporter, experts concluded at Hart Energy’s recently held Midstream Texas conference and exhibition.
Currently, Mexico imports more oil and gas products than it exports, according to Brandon Seale, president of Howard Energy México, a subsidiary of Howard Energy Partners. That is, if refined, finished and petrochemical products are removed from the equation and offset with crude exports—and through 2022, that picture could be “pretty acute.”
Mexico faces routine brownouts and shortages of gas for utilities and residences. There have been “days when there was no more gas in the system and they would just call their customers and say ‘Look, we’ve got to shut you off today.’”
However, that dwindling supply of natural gas could fetch $24 per million cubic feet (MMcf) across the border in the U.S. “South Texas and West Texas producers would have given their left arms to have gotten $2.50 per million cubic feet,” Seale said.
Overall, resources between the two countries feature a wide disparity. Mexico only has about 8,000 wells producing per day, while Texas alone has about 300,000, according to Seale.
For so few operating wells, Mexico’s oil and gas riches are “staggering,” Seale added. “[Mexico] is full of infrastructure and it’s full of hydrocarbons, just to give you the magnitude of the opportunity because a lot of it is untapped.”
Looking Ahead
All those refined, finished and petrochemical products, currently taken out of the equation, do provide potential future resources, and so Howard Energy México has been taking advantage.
The company is connected to both the Mexican market and the U.S. market—specifically the gas-producing area in Webb County, Texas. With a processing plant 20 miles from the international border, the company “looked for ways to connect to better, more premium downstream markets,” Seale said. First up was connecting to a line owned by Kinder Morgan Inc. (NYSE: KMI), and then the Agua Dulce Pipeline and the Mexican Los Ramones line.
Next, the company explored ways to build a line running directly to Monterrey, Mexico, which is one of the most developed cities in Latin America, Seale said. This line is “directly connected” to Webb County, he noted, adding that Monterrey was “one of the points in Mexico that was already kind of tapped out.”
Suppressed demand
“Looking at this market and demand, we also had a theory of suppressed demand in Mexico,” Seale said, “and so when we started talking about this project Mexico was importing 1 to 1.5 Bcf/d. … Well, today, we’re already at [5 Bcf/d] and that could possibly go up to [11 Bcf/d] because I think what you’re seeing in Mexico is what we’ve seen in this country too—when you make something cheap, plentiful and liquid, you will find ways to use it.”
Speaking about demand, panelist Michael Moss, vice president of development at Rangeland Energy III, highlighted Mexico’s oil-and-gas-related importation and demand statistics.
Moss said imports will continue growing even though at present, Mexico’s demand for gasoline and diesel is “relatively flat”—currently at 74% for diesel and 77% for gasoline. The “vast majority of imports both in gasoline and diesel is still being attributed to [national oil company] Pemex,” he said.
Erin Pedigo can be reached at epedigo@hartenergy.com.
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