Denver — Mexico's energy regulatory commission plans to publish month-ahead natural gas forward prices for the country's domestic market by next year, according to a senior official from the CRE.

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Publication of the price index would depend on sufficient transactional liquidity and transparency, Mirian Amaro, CRE director general for natural gas markets, said Thursday from the Platts Mexican Energy Conference in Mexico City.

"We don't want to distort the market," Amaro said, adding that the commission is hopeful that trade liquidity in 2019 will be sufficient to support publication of both forwards and next-day gas price indexes.

Currently, the CRE publishes a once-monthly gas price index, which includes a national reference price as well as six regional prices that correspond to defined geographic areas in Mexico.

The index, first published in July 2017, is based on monthly transaction sales reports submitted by marketers. It includes both marketing and transportation costs, but does not differentiate among fixed-price or indexed deals, or between spot or forward transactions.

TRANSPARENCY

Educating the market will be an important part of CRE's initiative to publish more frequently assessed gas price indexes, in both the cash and forward markets.

"We're helping marketers figure out how and when to report prices," Amaro said.

Boosting the volume of accurately reported transactions, though, could take time given the relatively small pool of participants that are currently active in Mexico's domestic gas market.

The ongoing buildout of Mexico's natural gas infrastructure should help, according to Ryan Ouwerkerk, manager for Platts Americas natural gas pricing.

"With greater interconnectivity in the country, I think you're going to start to see more opportunity for other players to become involved in the market," Ouwerkerk said Thursday from the conference.

Fermaca's Wahalajara pipeline and TransCanada's Sur de Texas-Tuxpan marine pipeline are two key components of that buildout, and should help to improve trade liquidity in Mexico by next year, Ouwerkerk said.

DISTRIBUTION

Looking beyond the looming border-area expansions, getting more gas distributors involved in markets deeper inside Mexico constitutes something of a conundrum.

For gas distributors, there needs to be more certainty in the medium term on market returns and profitability, according to Cristina Kessel, director for institutional relations at IEnova.

"There was a time when regulations were changing, which made it more difficult to plan," she said Thursday from the conference.

The regulatory situation has improved, she said, but there is still room for greater certainty.

PRICE FORMATION

While market participants and the CRE alike remain uncertain on the exact timeline for improved liquidity in Mexico's gas trade, the regulator has long said that it intends eventually to exit the pricing space, as price reporting agencies like Platts ramp up their coverage.

S&P Global Platts began publishing daily domestic gas prices for Mexico in May 2017. Since the prices were first launched, the index has continued to evolve along with Mexico's natural gas market.

Currently, Platts publishes prices in 16 locations within Mexico on a net forward model, utilizing final daily settlement prices in the South Texas and Southwest US markets as reference points, plus transportation costs.

-- J. Robinson, jrobinson@spglobal.com

-- Edited by Annie Siebert, newsdesk@spglobal.com