Mexico's gas squeeze is Texas' gain

Mexico's national oil monopoly has been issuing critical alerts seemingly every week, warning of natural gas shortages lasting hours or even days and crimping supplies to homes, power plants and factories.

And yet, the country has some of the world's largest natural gas reserves and easy access to a cheap and plentiful U.S. supply.

"There hasn't been enough energy planning in this country," said Raul Monteforte, a former senior official with Mexico's Energy Regulatory Commission who's now development director for Fermaca, a private Mexican transportation pipeline company. "Huge errors of omission have brought us a gas crisis."

The gas squeeze will only worsen as many of Mexico's new and existing electricity plants abandon coal and other fuels in favor of natural gas, gobbling up much of the available supply.

Petroleos Mexicanos, or Pemex, as the monopoly is called, will prove unable to get much more of the gas produced in its own fields to market.

Amid renewed political pressure to further open Mexico's energy industries to private interests, energy planners have launched a frenzied expansion of the country's woeful pipeline system. As much as 3 billion additional cubic feet per day of U.S. natural gas, most of it from Texas, will feed the new grid.

Central Mexican cities have been the worst affected by the critical shortage, but even companies in Monterrey, the industrial powerhouse that abuts the sprawling Burgos Basin gas fields, have been slammed.

"Such obstacles can't be permitted, even less so ones provoked by a state monopoly," Caintra, a leading Monterrey business association, declared in a full-page newspaper ad. "We demand an immediate solution."

Using an offshore Pemex subsidiary supposedly free of Mexican congressional oversight and constitutional restrictions, planners are rushing to build two new U.S. pipelines - to the Arizona border south of Tucson and from near Corpus Christi to the Rio Grande - to push that U.S. gas deep into the Mexican heartland.

Officials say the new pipelines will be completed by the late summer of 2014.

But Monteforte and other critics contend that plans for the lion's share of the expansion - shipping South Texas gas into the Mexican heartland - will assure Pemex's grip on gas consumers for decades to come.

"If it flies I think Mexico's gas market will remain in the hands of Pemex," said Monteforte in criticizing the Texas pipeline proposal.

His company is building and will own a 225-mile pipeline from the border at El Paso to near Chihuahua City, he said.

"This will kill the opening of the gas market we've fought for since the 1990s," he said.

The new U.S. pipelines, being contracted by Pemex's MGI gas trading firm, will connect to a privately owned system being built across northwestern Mexico and to the much larger Los Ramones duct that will run from near the border at McAllen deep into central Mexico.

After sharp increases in the late 1980s and early '90s, Mexico now imports some 15 percent of its natural gas supply from the United States, said Michelle Foss, program manager of the University of Texas' Bureau of Economic Geology in Houston. By 2010, Mexico had increased its U.S. gas imports by 200 times what it did in the early 1980s.

Now, Mexico's imports seem poised to spike again, perhaps bolstering prices for dry natural gas.

"Mexico will take all they can get and, as in the 1990s, could help to rebalance our market," Foss said.

Project proposals for the South Texas pipeline - called the Agua Dulce to Frontera - were expected Monday. Pemex says the winning bid will be announced Sept. 18.

"For us it's urgent to bring that gas," said Guillermo Ortiz, a Mexico City executive who heads the energy committee at Canacintra, a leading Mexican industrial chamber. "They took a long time to contract for the pipelines. These types of situations are really hurting the consumers."