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New York — US gas pipeline exports to Mexico surged to a new single-day record high this week, propelled by warming summer weather and a soft opening of Mexico's economy earlier this month.

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On June 10, US exports jumped to nearly 5.9 Bcf/d according to final cycle data now confirmed by S&P Global Platts Analytics. On June 12, evening cycle data, which could be yet revised, showed export volumes down significantly from the earlier high at an estimated 5.5 Bcf/d.

The midweek uptick on import pipelines in Mexico was widespread across nearly all of the border regions, with higher volumes on North Baja Pipeline, San Isidro – Samalayuca Pipeline, Kinder Morgan Mexico Pipeline, Nueva Era Pipeline, Tennessee Gas Pipeline and the Sur de Texas – Tuxpan Pipeline.

A 400 MMcf/d increase in south Texas exports, accounting for a sizeable portion of the gain, was driven by Sur de Texas, with most of the incremental volumes going to Tamazunchale Pipeline, which feeds large population and industrial centers in central Mexico.

After reopening economic activity in Mexico lifted US gas exports into the low 5 Bcf/d range earlier this month, volumes were propelled to the new record high mostly by weather. On June 10, population-weighted temperatures climbed to over 77 Fahrenheit, or nearly 4 degrees above normal.

On the same day, sample pipeline deliveries to Mexico's power generators climbed to nearly 2.8 Bcf/d, marking the highest level since late October 2019, data collected by Platts Analytics showed.

LNG IMPORTS

The combination of rising gas demand in Mexico and low global LNG prices is also prompting the country's state-owned power generator, CFE, to look further afield for supply. On June 12, Platts cFlow vessel tracking software showed three LNG cargoes en route to Mexico.

In a rare spot trade, a Wheatstone LNG sourced cargo from Australia was loaded aboard the British Mentor, chartered to BP, and is now bound for Mexico's Pacific Coast import terminal in Manzanillo.

In the Atlantic Basin, two separate cargoes – loaded aboard the GDF Suez Point Fortin from southern France and the Trinity Glory from Trinidad and Tobago – appeared bound for the Altamira LNG terminal.

According to Platts Analytics, depleted LNG inventories at Altamira could be restocked by the two partial cargoes with the volumes likely to be retained for system reliability purposes during maintenance events or extreme weather.

OUTLOOK

Platts Analytics is forecasting US pipeline exports to Mexico to average 5.5 Bcf/d over the balance of 2020, peaking to a monthly average high of 5.8 Bcf/d in August 2020 on expectations of midstream project completions.

The Wahalajara pipeline system should increase West Texas exports by a maximum of 400 MMcf/d once completed and will largely displace supply from the Manzanillo LNG terminal, while also delivering to the Tierra Mojada power plant.

Fermaca's website for pipeline flow data shows that the 886 MMcf/d Villa de Reyes – Aguascalientes – Guadalajara segment of Wahalajara was completed on March 31, 2020. Sources have revealed that the Cenagas is aiming to integrate the pipeline system into its operations, similar to Los Ramones, and that negotiations were expected to last through June 2020.

The Cempoala Phase II compressor station reversal will bring total southbound capacity along Mexico's Gulf Coast to 1.3 Bcf/d. Platts Analytics expects the compressor station upgrade to allow NET Mexico and Sur de Texas supply to reach further into southern and central Mexico.

NET Mexico could increase by 300 MMcf/d while the marine pipeline could flow 500 MMcf/d higher after Cempoala is completed. Still, downstream demand during the coronavirus pandemic could significantly limit the upside potential.

Mexican power burn is forecast to average 300 MMcf/d higher year-on-year through the rest of 2020 – even after factoring in 600 MMcf/d in demand loss from social distancing efforts through August 2020.

According to some ratings agency forecasts, Mexican GDP could contract by as much as 8% from 2019 to 2020, with the potential for that to reverberate into the industrial manufacturing sector, which relies heavily on gas-fired power for electricity supply.

Mexican GDP was already showing signs of weakness before the coronavirus pandemic, with the country's output falling 0.3% in 2019 versus 2018.