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US gas exports to Mexico ramp back up amid Texas supply doubts

U.S. gas pipeline exports to Mexico surged even after Texas Gov. Greg Abbott ordered a ban intended to help restore power to millions of residents. Even still, some policy observers indicated that damage to the bilateral energy relationship has already been done.

Abbott on Feb. 17 ordered that all natural gas produced in Texas remain in the state for five days, prompting questions about constitutional authority to interfere in interstate commerce. But shipments on Kinder Morgan Inc.'s El Paso Natural Gas Co. LLC and Tennessee Gas Pipeline Co. systems, which both originate in Texas, climbed from a combined 748,945 Dth/d on Feb. 16 to 1,038,902 Dth/d on Feb. 17 and stayed in the 1 million Dth/d range Feb. 18, according to S&P Global Market Intelligence data.

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In light of Abbott's order, some experts contended that U.S.-Mexico relations in the energy sector, and between Texas and Mexico in particular, have been strained after power outages gripped northern Mexico.

"It has obviously created tension," Andrew Rudman, director of the Washington, D.C.-based Wilson Center's Mexico Institute, said in an interview. "Some, including the secretary of economy, have said it calls into question Texas' reliability as a commercial partner."

According to power generator Comisión Federal de Electricidad, the biggest importer of U.S. gas in Mexico, roughly 60% of the electricity produced in the country is generated with natural gas. Data from Panjiva indicates that Texas accounted for 70% of U.S. gas exports in 2020.

Reuters reported Feb. 17 that Mexican Economy Minister Tatiana Clouthier has contacted the U.S. government for reassurances that Mexico would receive guaranteed gas supplies following Abbott's proclamation. Panjiva also noted that the action could spur Mexico to file a dispute under the United States-Mexico-Canada Agreement on free trade.

"It's one shock to say the biggest natural gas producer in the world all of a sudden doesn't have natural gas, and then it's a second shock to say the market-driven process we thought existed is all of a sudden subject to political intervention of a kind we haven't seen," James Coleman, an energy law professor at Southern Methodist University, said in an interview.

Longer term, the Wilson Center's Rudman indicated that Mexican President Andrés Manuel López Obrador may use recent events to strengthen support for rolling back the previous administration's initiatives to open the country to private energy companies.

"President López Obrador has been focused on Mexico reestablishing what he calls … energy self-sufficiency, and I think the impact of these blackouts reinforces in his mind the idea that Mexico needs to be self-sufficient," Rudman said. "This fits the story that movement toward opening the sector puts Mexico at risk."

Panjiva is a business line of S&P Global Market Intelligence, a division of S&P Global Inc.