Energy

Harvey’s wrath lays bare Mexico’s U.S. natural gas dependency

LONDON (Bloomberg) — Hurricane Harvey’s crushing blow to the U.S. energy industry reveals just how dependent Mexico has become on natural gas from its northern neighbor.

Source: World Oil by Ryan Collins & S&P Global Platts by Harry Weber

The storm’s wrath forced cross-border gas pipelines in Texas to shut and prevented tankers from loading cargoes of the fuel. Mexican consumers, who are burning record amounts of gas from America’s prolific shale basins, had no choice but to cut back as imports dropped 16% in a single day after Harvey hit before recovering.

After ending its state-owned energy monopoly four years ago, Mexico has supplemented dwindling domestic gas production with shipments from the U.S. As the two nations’ gas markets become more intertwined, however, supply disruptions in the U.S. — whether from natural disasters or policy changes like President Donald Trump’s threats to withdraw from the North American Free Trade Agreement — can send Mexico scrambling to find alternatives for American supply.

“Mexico has become more dependent on U.S. natural gas as they now rely on the U.S. for more than half of their supply,” up from 25% in 2014, Jacob Fericy, analyst at Bloomberg New Energy Finance, said Friday in an email.

Before Harvey made landfall, Kinder Morgan Inc.’s Tennessee Gas line shut two compressor stations in south Texas as employees evacuated, cutting the amount of the fuel that would eventually make it to Mexico. One station remained offline Friday, and gas exports to Mexico probably won’t return to normal until the first week of September, Fericy said.

About 8.1% of daily Gulf of Mexico natural gas output remained offline Monday, 10 days after Harvey began to wreak havoc to the center of US energy infrastructure. It was a slight improvement from 8.4% offline Sunday. The Bureau of Safety and Environmental Enforcement reported that, based on data from operator reports submitted as of 11:30 am local time, about 259.2 MMcf/d of Gulf gas production of 3.2 Bcf/d was shut in.

Personnel remained evacuated from 14 production platforms, or 2% of the 737 manned platforms in the Gulf of Mexico, down from the 30 production platforms that saw evacuations as of Sunday.

Ships Halted

Meanwhile, Cheniere Energy Inc.’s Sabine Pass terminal — the only plant shipping liquefied natural gas from the U.S. — was forced to halt exports as severe weather made it too dangerous for vessels to board. Sabine Pilots, which coordinates ship movements near the terminal, said Friday that traffic may remain stopped for a few more days.

At Cheniere Energy’s Sabine Pass LNG export terminal in Cameron Parish, Louisiana, tankers still were unable to access the site Monday because inbound and outbound traffic along the Intracoastal Waterway feeding the terminal remained suspended.

A dispatcher for Sabine Pilots, which navigates vessels along the waterway, said the suspension would be in effect until further notice.

Because of these cuts, Petroleos Mexicanos, Mexico’s state-owned petroleum company, asked consumers to use about 10% less gas last weekend, according to a company spokesperson who asked not to be identified, citing internal policy. Though Cenagas, which oversees Mexico’s gas storage and pipelines, had asked consumers to curtail demand, the system has returned to normal, said Rosanety Barrios, director of industrial transformation at Mexico’s Energy Ministry.

 

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