Mexico’s natural gas production is in crisis

In the last seven years, Mexico's natural gas production dropped 28% while gas imports reached record levels

Mexico’s natural gas production is in crisis
On the first semester of the present year, average daily production was of 4,823 million cubic feet - Photo: Ints Kalnins/REUTERS
English 14/08/2018 19:57 Noé Cruz Serrano Mexico City Actualizada 20:00

Mexico’s energy sector is in crisis and natural gas production and supply is no exception, showing no signs of improvement in the short and medium term, in spite of private companies’ acquisitions in the last bidding rounds.

According to a report issued trough the National Transparency Platform by Mexican Petroleums (PEMEX), natural gas production has been declining since 2009, when it reached a maximum extraction level of 7,030 million cubic feet per day. In 2017, extraction dropped to 5,068 cubic feet, which represented a 28% decrease.

On the first semester of the present year, average daily production was of 4,823 million cubic feet. The natural gas crisis hasn’t showed signs of receding, despite the approval of Mexico’s Energy Reform, which was meant to increase gas production to 8,000 million a day in 2018 and 10,400 million in 2025.

Furthermore, natural gas extracted from the fields of south and southeast Mexico is polluted with high levels of hydrogen, forcing PEMEX to give discounts to the appliances sectors in the region. This gas production, however, represents 30% of overall extractions in the country.

The crisis has spread to PEMEX’s gas processing centers to a point where they have had to reduce their utilization levels from 66% in 2007 to 42% in the first half of 2018.

The Ministry of Energy (SENER) has acknowledged that “natural gas imports have increased to cover national demand in face of a production decrease.”

In 1998, Mexico bought 146 million cubic feet a day from foreign markets. In the month of June 2018, the Mexican government bought 5,106 million cubic feet a day from the United States, representing a 3,397% increase.

The Ministry’s report has shown that imports of this type of fuel tends to double natural gas production.

In an interview with EL UNIVERSAL, the corporate financial director of PEMEX, David Ruelas, stated that “this is not so much a cause for concern, but a matter that we are currently acting on.”

He indicated that “gas production during the second quarter led to an overall production of 3,915 million cubic feet a day, but there are plans to undertake exploration and production projects, some of which will deal with gas handling, at the beginning of next year.”

He emphasized: “We have to consider that the United States has a large supply of this type of fuel in the Permian Basin area and southern Texas, giving Mexico’s energy sector an opportunity to enhance its oil and gas production.”

However, the outlook for the following years is far from flattering.

According to the General Management of Natural Gas and Petrochemicals from SENER, Mexico’s oil production for the year 2031 will be of barely 5,297 million cubic feet per day.

Production levels forecast are equivalent to those of 2016 and 2017, and far under the 7,030 million produced in 2009.

Humberto Moreira Rodríguez, head of the National Hydrocarbons Commission (CNH), commented that the government must commit to increasing production so that the natural gas sector does not rely on imports.

A few days ago, the CNH announced the publication of several recommendations to address the natural gas problem.