New Pemex Processing Plant to Boost Mexico's Production of Natural Gas

SourceMex Economic News & Analysis on Mexico, April 28, 1999 | Go to article overview

New Pemex Processing Plant to Boost Mexico's Production of Natural Gas


The state-run oil company PEMEX has opened a new cryogenic plant in southeastern Mexico that could help address the rapid growth in domestic demand for natural gas. The plant, located in Tabasco state, has the capacity to process about 18 million cubic meters of wet gas to produce the equivalent 15.5 million cubic meters of natural gas per day. With the output from the new plant, Mexico's natural-gas production is expected to approach 150 million cubic meters per day by the end of this year. The latest increase in production is part of a trend that began in the mid-1990s. Natural-gas output increased from about 107.725 million cubic meters per day in 1993 to about 137.37 million cubic meters in 1998. In February of this year, daily production was estimated at about 142.41 million cubic meters. The steady increase in natural-gas production, however, will be insufficient to meet the surge in domestic demand. A forecast published by the Secretaria de Energia (SE) earlier this year said demand for natural gas in Mexico is expected to reach 13 million cubic meters per day, more than four times the 2.58 million cubic meters recorded in 1998. Mexico to face 20% deficit in natural gas by 2007 Because of the sharp increase in demand, Mexico expects a natural-gas deficit of more than 20% by 2007. The SE predicted Mexico will become a net importer of natural gas as early as 2001. The US and Canada, Mexico's partners in the North American Free Trade Agreement (NAFTA), will probably supply the majority of Mexico's imported natural-gas. Under a NAFTA timetable, Mexico is scheduled to eliminate all tariffs on US and Canadian natural-gas imports by December 2002. The US and Canadian governments, with the support the Mexican business community, have been pushing Mexico to eliminate the tariff much sooner. Energy Secretary Luis Tellez has also endorsed a faster phaseout of the tariff (see SourceMex, 1998-10-21). The rapid increase in natural-gas demand is partly a result of the government's efforts to promote the conversion of gas-distribution systems in many metropolitan areas to natural gas from liquefied petroleum (LP). The SE has targeted a reduction in LP usage to 45 million cubic meters by 2007, or roughly one-fifth of Mexican households. Since 1995, the Comision Reguladora de Energia (CRE) has awarded 11 contracts to Mexican-foreign consortia to construct infrastructure and distribute natural gas in some of the country's largest metropolitan areas. The partnerships that obtained the concessions have thus far invested an estimated US$1.5 billion in the natural-gas projects. Five gas distribution concessions scheduled this year The CRE is scheduled to award another five concessions this year for gas-distribution projects in communities and industrial corridors in the states of Coahuila, Durango, Tamaulipas, Baja California, Aguascalientes, Tlaxcala, and Puebla states (see SourceMex, 1999-01-20). …

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