Natural Gas Is in Mexico to Stay

28 February 2019
By Veronica Irastorza

The February issue of the journal Energy & Commerce features a series of articles written by prominent women within the energy industry in Mexico. NERA Associate Director Veronica Irastorza contributed to the issue and wrote an article focused on the future of natural gas in Mexico and how the country will embrace the market as it moves toward reducing its reliance on higher-carbon fuels.

According to the International Energy Agency, the international demand for natural gas increased 23% in the last decade and is expected to grow by close to 50% during the next 50 years. In Mexico, the demand for natural gas has also increased while its production has dropped, and the country must import five times more gas than it did 10 years ago. Ms. Irastorza observes that natural gas demand is likely to keep increasing in the near future. President Lopez Obrador has enacted the Proyecto de Nación, which aims to extend gas pipelines to regions that do not currently have access, convert conventional plants to combined cycles, and adapt other thermal plants to dual fuels.

Despite this optimistic scenario, natural gas production for 2019–2024 would still imply large natural gas imports. Ms. Irastorza states that it therefore makes sense to integrate Mexico into North America’s uniquely efficient and liquid market, where the old monopoly “operator” is not required and the gas and gas transport markets operate competitively. Mexico has one of the oldest and most extensive gas systems in the world, which has been used to boost its overall electricity supply in the last decade and to displace higher-carbon fuels. Yet, Mexico’s gas industry has hybrid regulation (which has no precedent in any other mature market worldwide) and it is still a work in progress.