Before the Deluge, Part 2 – More Mexican Gas Pipelines on the Way, But Challenges Loom

The Mexican market is critically important to Permian producers. Rising gas demand south of the border — along with expected gains in LNG exports from new liquefaction/export facilities along the Gulf Coast — are key to their plans to significantly increase production of crude oil, which brings with it large volumes of associated gas. All that gas needs a market, and nearby Mexico is a natural. For a number of years now, Mexico’s Comisión Federal de Electricidad has been working to implement a plan to add dozens of new gas-fired power plants and to support the development of new gas pipelines to transport gas to them from the U.S. The new pipelines have been coming online at a slower-than-planned pace. But what pipeline capacity has been added across the border from West Texas is already changing Mexico’s gas market. The El Encino Hub in Northwest Mexico is one such area where there are signs of a shifting supply-demand balance. Today, we continue a blog series on key gas pipeline developments down Mexico way and the implications for gas flows, this time delving into the dynamics at the El Encino Hub.



RBN Energy

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