Mexico's Pemex says natural gas imports could end by 2017

 

 

 

By David Alire Garcia

MEXICO CITY,
Sept 12 | Thu Sep 13, 2012
 

MEXICO CITY, Sept 12 (Reuters) - An official with state oil company Pemex predicted on Wednesday that Mexico would be able to end natural gas imports by 2017, but some analysts found the prospect doubtful.


"It is totally feasible," said Carlos Morales, director of Pemex Exploration and Production, after a speech at the annual Mexican Petroleum Congress, a four-day gathering of foreign and national industry executives.


Morales said Pemex does not expect current low natural gas prices in North America to prevail for long a nd, without directly saying so, he indicated that rising prices would lead to increased Mexican gas production.


"Demand for natural gas is also increasing in the United States, and that's going to bring prices back to more attractive levels for producers," Morales said.


Mexican natural gas production is down nearly 5 percent this year. Since 2009 domestic production has dropped 9 percent, according to the Mexican Natural Gas Association.


"Whether Mexico will be able to come up with the production to make up for the imports, I would say that's a big challenge," said Luis Labardini, a partner at Mexico City-based energy consultancy Marcos and Associates.


Labardini said that Pemex has prioritized oil projects over gas projects in Mexico's Burgos and the Veracruz basins, home to the country's large non-associated natural gas deposits.


"Right now, I can't see any reason to believe that Mexico's (natural) gas production is going to increase significantly in the medium or long term," said independent oil analyst David Shields, who is also based in Mexico City.


"All of that will depend on the price of gas," he added. "With the current price of gas, there's just no market incentive to increase production."


Due largely to increased supplies, U.S. natural gas prices remain very low, hovering around $3.00 per million cubic feet. They are down more than 75 percent since 2008.


Mexico's natural gas imports have been rising, reaching 790 million cubic feet last year. They are expected to hit 934 million cubic feet this year.


According to the U.S. Energy Information Administration (EIA), Mexico boasts the world's fourth-largest reserves of shale gas in deposits that may contain rich pockets of both natural gas and more profitable oil.


The EIA estimates that Mexico, the world's No. 7 oil producer, has up to 680 trillion cubic feet (tcf) of natural gas.


Early Pemex studies are more conservative than the EIA estimate and see between 150 and 459 tcf of shale gas in five different geological provinces in the country.