Mexico Stepping Up Natural Gas Imports as Pemex Focuses on Oil Production

Mexico, which is building about six new power plants this year, is likely to step up natural-gas imports because slumping prices for the fuel are deterring state-owned Petroleos Mexicanos from developing its own fields.

Domestic supply isn’t sufficient to cover the needs of Comision Federal de Electricidad, the country’s state power company, Sergio Alcocer, Mexico’s deputy energy minister, said yesterday in an interview in La Jolla, California. Pemex isn’t planning to exploit as much as 1 trillion cubic feet of gas reserves it recently found to focus on oil output, he said.

“We anticipate that the country will keep importing more gas as long as it’s cheaper than producing it,” Alcocer said. “Pemex maximizes its profit when it produces and exports crude oil, and as a company, that’s where its interests lean.”

CFE, as the utility is known, is expected to start the construction this year of “about a half-dozen” power generation plants using fossil fuels, Alcocer said. Increased demand for gas may boost sales from U.S. companies, such as Apache Corp. and Cheniere Energy Inc., which are building liquefied natural gas export terminals betting they can find more foreign buyers.

Pemex, as Latin America’s largest oil producer is known, has primarily found gas in nine deep-water wells it successfully explored since 2004. The Mexico City-based company hasn’t developed plans to exploit the deposits that could boost gas reserves by almost 1 trillion cubic feet.

Balanced Market

Proved reserves are those that have a reasonable certainty of being recoverable under existing economic and political conditions with current technology.

“The ministry has been in talks with CFE and Pemex seeking a balance for the gas market,” said Alcocer, who was named deputy minister on April 6.

On March 23, Pemex said it found enough shale gas in the northern state of Coahuila to estimate that the region has the potential to produce 300 million cubic feet a day of shale gas and 40,000 barrels of oil a day. Plans to develop those fields will depend on the U.S. gas futures market, Carlos Morales, Pemex’s head of production and exploration, said last month.

Natural-gas futures traded in New York averaged $4.20 per million British thermal units during the first quarter, a 16 percent decline from a year earlier, as new wells from Wyoming to Pennsylvania created excess supply in the North American market. Natural gas for June delivery dropped 13 cents, or 2.9 percent, to $4.191 per million British thermal units at 12:57 p.m. on the New York Mercantile Exchange.

U.S. Shale Growth

U.S. shale gas production increased by an average of 48 percent a year from 2006 to 2010, according to the Energy Department in Washington. Output will rise almost threefold from 2009 to 2035, the department predicted in its Annual Energy Outlook release on April 26.

Last year, the U.S. Energy Department approved a natural- gas terminal in Louisiana, operated by Cheniere, to export LNG to countries with U.S. free trade agreements.

(Source: http://www.bloomberg.com/news/2011-05-17/mexico-stepping-up-natural-gas-imports-as-pemex-focuses-on-oil-production.html)