Harvey’s wrath lays bare Mexico’s US natural gas addiction

Hurricane Harvey’s crushing blow to the US energy industry reveals just how dependent Mexico has become on natural gas from its northern neighbour.


The storm’s wrath forced cross-border gas pipelines in Texas to shut and prevented tankers from loading cargoes of the fuel. Mexican consumers, who are burning record amounts of gas from America’s prolific shale basins, had no choice but to cut back as imports dropped 16% in a single day after Harvey hit before recovering.


After ending its state-owned energy monopoly four years ago, Mexico has supplemented dwindling domestic gas production with shipments from the US. As the two nations’ gas markets become more intertwined, however, supply disruptions in the US — whether from natural disasters or policy changes like President Donald Trump’s threats to withdraw from the North American Free Trade Agreement — can send Mexico scrambling to find alternatives for American supply.


“Mexico has become more dependent on US natural gas as they now rely on the US for more than half of their supply,” up from 25% in 2014, Jacob Fericy, analyst at Bloomberg New Energy Finance, said on the 1st September.


Before Harvey made landfall, Kinder Morgan Inc’s Tennessee Gas line shut two compressor stations in south Texas as employees evacuated, cutting the amount of the fuel which would eventually make it to Mexico. One station remained offline on the 1st September, and gas exports to Mexico probably will not return to normal well into the first week of September, Mr Fericy said.


Ships Halted

Meanwhile, Cheniere Energy Inc’s Sabine Pass terminal — the only plant shipping liquefied natural gas from the US — was forced to halt exports as severe weather made it too dangerous for vessels to board. Sabine Pilots, which coordinates ship movements near the terminal, said on the 1st September that traffic may remain stopped for a few more days.


Because of these cuts, Petroleos Mexicanos, Mexico’s state-owned petroleum company, asked consumers to use about 10% less gas last weekend, according to a company spokesperson. Although Cenagas, which oversees Mexico’s gas storage and pipelines, had asked consumers to curtail demand, the system has returned to normal, said Rosanety Barrios, director of industrial transformation at Mexico’s Energy Ministry.


Mexico’s appetite for natural is poised to grow even more, with the nation’s demand for the fuel poised to climb about 20% in 2030 from 2015, according to the Energy Ministry. The country plans to expand its pipeline infrastructure 75 percent by next year, the ministry said.