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Mexico sees dependency on US natural gas imports as a risk, seeks private support to diversify energy mix: official

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Mexico sees dependency on US natural gas imports as a risk, seeks private support to diversify energy mix: official

Highlights

Government to set up industry working groups to evaluate future of long-term electricity auctions

Private investment needed in Mexico's upstream sector to raise domestic gas output

Mexico City — Mexico's most significant strategic energy risk is its large dependency on natural gas imports from the United States, a senior adviser with President Andres Manuel Lopez Obrador said Wednesday.

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Mexico is the only country in the world that sources over 50% of its natural gas supply from a single country, Abel Hibert said during the Mexico Energy Forum 2019 in Mexico City.

"We have to diversify our energy supply as well as generation sources," Hibert said. "Our large dependency on gas imports is our greatest strategic risk."

In Mexico, 62% of power is generated using gas, while in other import-dependent countries this level does not exceed 40%. Meanwhile, clean generation only represented 21% of all electricity generated in the country, he added.

Hibert said the government is going to release strategic planning documents related to the energy sector by mid-2019 after it publishes its National Development Plan in April, which is the administration's main planning document.

The government is going to promote the use of geothermal and hydropower generation to diversify its generation mix, he added.

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Unless there are major and significant investments, state-owned companies CFE and Pemex are not going to be able to supply all of Mexico's energy needs alone, Hibert said.

Mexico also requires support from the private sector to increase upstream investment to reverse the decline in gas production as Pemex cannot do this alone, he added.

"Pemex is exploring proposals so the private sector can share its upstream risk," Hibert said.

"To be able to diversify our energy mix and access lower cost energy, the role of the private sector is important," he said.

The Mexican government is evaluating the benefits of long-term renewable generation auction, Hibert said.

The government is setting up industry working groups to get feedback and data from companies about private participation in the power market and the future of long-term electricity auctions, he added.

-- Daniel Rodriguez, daniel.rodriguez@spglobal.com

-- Edited by Derek Sands, newsdesk@spglobal.com