BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
COOKIE NOTICE

Register with us today

and in less than 60 seconds continue your access to: Latest news headlines Analytical topics and features Commodities videos, podcast & blogs Sample market prices & data Special reports Subscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

IF you are a Platts Market Center subscriber, to reset your password go to the�Platts Market Center to reset your password.

In this list
Natural Gas

Anemic drilling rates in Mexico point toward further gas output declines

Steel

An atypical year for Brazilian steel: Price hikes, slow recovery and presidential elections

Natural Gas | Natural Gas (North American) | Crude Oil

Platts Upstream Indicator

Agriculture | Natural Gas | LNG | NGL | Oil | Crude Oil | Refined Products | Petrochemicals | Shipping

Houston Energy Forum at the S&P Global Platts Energy Symposium

Natural Gas | LNG

Tellurian no longer interested in Toshiba liquefaction capacity at Freeport LNG: source

Watch: Anemic drilling rates in Mexico point toward further gas output declines

Platts Analytics expects total Mexican dry gas production will fall another 0.4 Bcf/d by the end of 2017, further increasing Mexico's need for US pipeline imports. However, this year has seen a number of delays on new export pipelines. Ross Wyeno explains how much LNG could be imported to help fill demand, as well as how the power sector is turning to fuel oil.

View Full Transcript

Video Transcript


Anemic drilling rates in Mexico point toward further gas output declines

By Ross Wyeno, senior energy analyst

Welcome to the Snapshot, a series examining the forces shaping and driving global commodities markets today.

The Mexican gas markets are looking increasingly tight this summer as dual factors — falling domestic production and pipeline delays — threaten to create supply shortages and increase reliance on fuel oil for power generation.

According to SENER data, Mexican dry gas production fell to 3.2 Bcf/d in March, a 0.5 Bcf/d drop from a year prior. The data also noted that active rigs in Mexico fell to six during the month, down 23 rigs from last year. Of those rigs, only one rig was operating in the onshore areas.

This is in stark contrast to drilling in the US, where activity nearly doubled over the same timeframe. Anemic drilling rates in Mexico likely point towards further natural gas production declines through the remainder of 2017.


Total Mexican dry gas production expected to fall another 0.4 Bcf/d by end of 2017: Platts Analytics


Platts Analytics expects that total Mexican dry gas production will fall another 0.4 Bcf/d by the end of the year, further increasing Mexican need for US pipeline imports.

However, 2017 has seen a number of delays on new export pipelines, which have limited export growth this year-to-date. The most important of these delays have faced the Trans-Pecos and Nueva Era pipelines.

Furthermore, downstream of these pipelines, persistent constraints are expected to limit export growth to below 0.5 Bcf/d before mid-August, when the Nueva Era pipeline is scheduled to come online.


Mexico’s gas shortages met through more LNG imports, increased fuel oil burn in power markets


These delays have already created supply shortages in Mexico, which have been met through additional LNG imports and increased fuel oil consumption in the power markets.

With LNG import capacity likely to top out at around 0.7 Bcf/d, Mexico will likely become increasingly dependent on fuel oil generation to balance the power markets. However, the fuel oil generation stack has seen substantial retirements in the past year as the CFE has retooled their fleet and replaced it with gas-fired capacity.

According data collected by Platts Analytics, Mexico has retired nearly 3.4 GW of fuel oil generating capacity since the end of 2015, or around 25% of the fleet. These retirements, along with higher expected fuel oil consumption overall, are likely to drive higher utilizations at fuel oil generating stations this summer and will likely to result in higher power prices for Mexican consumers — particularly in areas with limited access to US pipeline gas.

Until next time on the Snapshot — we’ll be keeping an eye on the markets.