Pipeline Natural Gas Exports to Mexico Seen Rising in 2022, 2023

Natural gas exports via pipeline from the United States to Mexico could average 8.8 Bcf/d in 2022, up 4% from 2021, according to the latest modeling by the U.S. Energy Information Administration.

Pipeline flows to Mexico are then expected to rise by an additional 4% to reach 9.2 Bcf/d in 2023, EIA researchers said in the latest Short Term Energy Outlook (STEO) published earlier this month.

Although South Texas remains the leading source of Mexico’s gas imports, West Texas has been gaining ground as new pipeline infrastructure has come online in Mexico, according to a recent report by BTU Analytics.

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Multiple LNG export projects that would source gas primarily from the United States are slated to come online over the coming years as well. These include Sempra’s Energía Costa Azul Phase 1 terminal, Mexico Pacific Ltd. LLC’s project in Puerto Libertad, Sonora, and a series of floating liquefied natural gas terminals planned by New Fortress Energy Inc.

U.S. LNG exports, meanwhile, are now expected to drop to 10.5 Bcf/d in the second half of this year following the prolonged outage at the Freeport LNG terminal on the Texas coast, EIA said.

The 10.5 Bcf/d estimate for LNG exports in the second half of the year reflects a 14% drop from month-earlier projections. For full-year 2022, EIA expects U.S. LNG exports to average 10.9 Bcf/d before rising to 12.7 Bcf/d in 2023.

The agency’s modeling assumes a return to full service at the 2.0 Bcf/d Freeport terminal by January 2023.

“Strong natural gas demand and high LNG prices in Europe and Asia drove the continued growth in U.S. LNG exports in the first half of this year,” researchers said. “During the first five months of 2022, the United States exported 71% of its LNG to Europe, compared with an annual average of 34% last year.”

Natural gas spot prices at Henry Hub averaged $6.07/MMBtu through the first six months of 2022, according to the latest STEO.

“The average price increased in each month from January through May, when it reached $8.14 before declining to $7.70 in June,” researchers said.

For the latest STEO, EIA modeled an average spot price of $5.97 at the national benchmark for the second half of 2022, with prices expected to average $4.76 for full-year 2023.

Compared with 2021 levels, domestic natural gas consumption is set to increase 2.9 Bcf/d, or 3%, to 85.9 Bcf/d on average this year. Consumption will then ease lower to 85.4 Bcf/d in 2023, EIA projections show.

The share of natural gas in the power stack is on track to hold flat at 37% this year, despite prices for U.S. power generators rising from $4.97 in 2021 to $6.35 in 2022, according to EIA’s forecasting.

“The similar share of natural gas generation despite higher prices results partly from our forecast that electricity generation from coal will decline from 23% of the total in 2021 to 21% in 2022 and 20% in 2023,” researchers said. This “reflects the continued retirement of coal-fired generating capacity and other coal market constraints.”

U.S. dry natural gas production will average 96.2 Bcf/d for full-year 2022, a 2.7 Bcf/d (3%) increase year/year, according to the latest STEO. Production is on track to approach 100.0 Bcf/d on average in 2023, researchers said.