Mexican leader’s focus on oil leaves a blind spot: natural gas

As Lopez Obrador walks back reforms and foreign investment, U.S. exports to Mexico soar

MEXICO CITY — Mexico’s president, the left-leaning populist Andres Manuel Lopez Obrador, has roiled the international energy industry by walking back market reforms designed to attract foreign investment, modernize Mexico’s oil industry and end fuel and power shortages.

Instead, Lopez Obrador has canceled offshore lease auctions, pledged to build new refineries and moved to reassert the dominance of the state-owned oil company Petroleos Mexicanos, or Pemex, all with the goal of weaning the country from its dependence on foreign — read American — petroleum.

Those efforts, however, appear to end with oil. In the nationalistic fervor to achieve energy self-sufficiency, Lopez Obrador’s administration has largely ignored natural gas. Mexico already relies on U.S. imports to meet about 65 percent of its natural gas consumption, and that share is only expected to grow over the next two decades as growing manufacturing and power sectors boost demand for natural gas substantially.

By 2025 alone, Mexico’s natural gas consumption is projected to grow 20 percent to 9.1 billion cubic feet a day from 7.6 billion cubic feet.

This is good news for Texas oil and gas companies, which are producing such vast amounts of natural gas at such low prices that many are just simply burning off, or flaring, the gas as they focus on recovering oil in shale plays such as the Permian Basin in West Texas. Ultimately, analysts say, Texas gas producers need to expand foreign markets to lift demand and prices for their product.

“Mexico is an enormous natural gas client,” said Dwight Dyer, a former senior official in the Energy Ministry in the administration of Lopez Obrador’s predecessor, Enrique Peña Nieto. “If you are a fracker in the Eagle Ford or the Permian Basin, your mouth should water over the Mexican pipeline infrastructure coming online, because it is going to be one of your biggest outlets for the next 15 years. For however long you can keep up production, Mexico will buy it.”

The Lopez Obrador administration’s natural gas approach has been inadvertently shaped by the consequences of other decisions on energy, such as putting up barriers to

Billy Calzada / Staff photographer Mexico’s imports of natural gas fuel Texas’ shale market.

Presidencia de Mexico Carlos Slim is a Mexican billionaire whose company, Grupo Carso, was the first of the pipeline firms to reach a deal with the government.