Friday, July 12, 2024

Natural gas production even more critical than gasoline: regulator

Mexico should produce more of its own natural gas to reduce dependence on imports from the United States, according to the National Hydrocarbons Commission (CNH).

Juan Carlos Zepeda, president of the federal agency, told the newspaper El Financiero that Mexico relies on U.S. imports for 85% of its gas needs, which he said creates not only a “geopolitical risk” but also an “operational risk” due to the possibility of a natural disaster interrupting supply.

“One of the first things we have to do . . . is produce more [of our own gas],” Zepeda said, sending a clear message to president-elect Andrés Manuel López Obrador.

This year, Mexico has imported an average of almost 120 million cubic meters of gas per day via pipelines that run into the north of the country.

Meanwhile, Mexican production of natural gas declined by 8.9% in May compared to a year earlier, according to data from the Mexican Energy Information System.

While López Obrador has said that he will seek to end massive gasoline imports — which also mainly come from the United States — and boost domestic production capacity by building one or two new refineries, Zepeda charges that ensuring Mexico’s gas security is an even more pressing need.

Speaking at a recent business forum, the CNH chief said that it is possible to bring gasoline into the country via ship in two days but because Mexico has insufficient regasification capacity, it cannot import gas by the same means.

Zepeda added that the need to produce more gas domestically represents an opportunity for the transformation of Pemex, explaining that the state oil company was awarded the rights to 90% of Mexico’s proven gas reserves but has been unable to exploit them due to a lack of capital.

He recommended that the government replicate the model in use in China, where petroleum companies owned and operated by the state are permitted to undertake joint ventures in order to raise capital.

Zepeda also said the federal government should provide tax incentives to encourage gas exploration and production and invest in increasing regasification capacity to mitigate the risk of supply cuts due to natural disasters such as hurricanes.

The latter measure would also allow gas purchases to be made from a greater range of suppliers located in countries that don’t share a land border with Mexico.

“We have a very limited regasification capacity in Mexico so our vulnerability [to supply cuts] is greater,” Zepeda said.

The CNH estimates that if Pemex increases its focus on the development of natural gas reserves, an additional 85 million cubic meters of gas could be produced daily, increasing Mexico’s daily output to 283 million cubic meters per day.

Source: El Financiero (sp), Milenio (sp)

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