Mexico plans to become an export hub with US-drilled natural gas

Mexico — which imports nearly all of the natural gas it burns — has laid out a somewhat surprising mission: to become one of the world’s top exporters of the fuel, and fast.

Although natural gas exports from Mexico are today non-existent, seeing as it produces too little of the power-plant fuel to supply even its own domestic needs, the country’s physical proximity to booming US reserves positions it well to supply American gas to hungry buyers in Europe and Asia. With US shale in mind, a total of eight liquified natural gas export projects have been proposed south of the border boasting annual combined capacity of 50.2 million tons. Some of the operations aim to come online as soon as next year.

If they’re all completed, the Latin American newcomer would join a very small club of nations that ship abroad the super chilled fuel — commonly called LNG — clocking in at No. 4 behind only the US, Australia and Qatar. And unlike those other three export heavyweights, Mexico would mostly be shipping out gas that it imported in the first place.

Mexico’s big plans to enter the export market come at a time when natural gas demand is soaring globally. Gas was already gaining in popularity versus dirtier fossil fuels like coal due to its comparatively lower carbon footprint when the war in Ukraine propelled demand to an entirely new level. Forty-four markets imported LNG last year, almost twice as many as a decade ago, the International Group of Liquefied Natural Gas Importers said, and the world has been racing to boost both import and export capacity in the months since. Asia has been the destination for nearly half of US LNG cargoes over the past two years, though Europe’s efforts to diversify away from Moscow means buyers in all regions are competing for a limited supply of the fuel.

“Mexico is set to become an exporter of US-produced natural gas and this is mostly driven by market dynamics that are taking place globally — especially those in Asia — not precisely due to Mexico’s policies,” said Adrian Duhalt, a scholar at the Baker Institute’s Center for the United States and Mexico at Rice University.

© 2022 Bloomberg L.P.

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