The Mexican government is going forward with a multibillion dollar plan to expand its natural gas pipeline system, the Houston Chronicle reports, and the new network will be powered by American natural gas, including gas from South Texas and the Eagle Ford shale fields.
Mexican officials hope this gas can help sate the country’s “gnawing energy craving,” the Chronicle’s Dudley Althous wrote.
Although Mexico will award contracts to both U.S. and Mexican companies to construct $3 billion worth of new pipelines from south of the Rio Grande into central and northwest Mexico, Houston-based Kinder Morgan has already proposed extending its pipelines near Tucson and connecting them to Mexico’s planned duct running 600 miles to the Pacific port of Mazatlan.
The pipeline would initially export 160 million cubic feet of gas a day to Mexico, the company said. The project is currently awaiting regaulatory approval on the U.S. end.
Mexico’s current 5,500-mile system is failing to adequately supply the country’s developing industrial cities, Mexican Energy Minister Jordy Herrera told Althous. “This network is clearly and notoriously insufficient.”
The U.S. already exports large quantities of natural gas to Mexico: 500 billion cubic feet of American gas was shipped there in 2010, according to U.S. Energy Department data cited by James Aldridge at the San Antonio Business Journal .
Although the deal promises to bring money into Texas, there may be more cost-effective ways to hawk Texas gas internationally. “Some argue that with natural gas prices as much as four times higher in Asia and Europe, selling it to Mexico at near historic bottom U.S. prices might not make sense,” Althous wrote.
What are some alternatives? “Pipelines are expensive,” said Bill Gwozd, vice president of gas services at Ziff Energy, a consulting firm with offices in Houston. “Why not throw that money into a liquefied-gas facility and get $12 for your gas?”