North American natural gas prices were subdued this week despite a boost from lower production and some lingering cold weather.
On Thursday, the New York Mercantile Exchange contract for April settled at $1.683/MMBtu, down 1.6 cents on the day. As a comparison, NGI’s next-day Henry Hub traded Wednesday for Thursday delivery at $1.565, down a penny from Tuesday’s trade.
The big event of the week was the gathering of energy leaders at CERAWeek by S&P Global in Houston. The buzz was around the U.S. government’s pause on new LNG permits and how this might impact the robust U.S. and Mexico pipeline projects.
Speaking at the event, U.S. Secretary of Energy Jennifer Granholm called the pause a temporary step to better policymaking. “This study is like other studies we’ve done in the past, assessing where we are, and I can predict… that as we sit here next year, this will be in the rearview mirror,” she told the audience.
At least seven projects in the United States and Mexico could be impacted in the near term, according to an NGI review of pending projects, equivalent to some 9.3 Bcf/d in export capacity. Producers in particular are looking to liquefied natural gas as a long-term source of demand growth.
Sempra Infrastructure President Tania Ortiz Mena said at the event that the industry was focusing on the word “temporary.”
“Energy infrastructure projects take years to develop and more years to build, so we simply continue to advance on our projects,” Ortiz said.
Sempra is developing Energia Costa Azul in Mexico’s Baja California. The 3 million metric ton/year (mmty) first phase is under construction with exports forecast to begin in 2025. The 4 mmty Vista Pacifico project, proposed for Topolobampo, Sinaloa, is currently unsanctioned.
Mexico Pacific Ltd.’s COO Sarah Bairstow said the final investment decision for the company's 15 mmty export project in Sonora is "relatively imminent."
The U.S. Federal Energy Regulatory Commission (FERC) last month approved Oneok Inc.’s proposed 2.8 Bcf/d Saguaro Connector natural gas pipeline, designed to transport Permian Basin supply to the U.S.-Mexico border. The pipeline would transport gas to Mexico Pacific’ Saguaro Energía LNG export plant envisioned for Puerto Libertad, Sonora, on the country’s west coast.
“LNG and the natural gas price is what everyone is talking about,” Mexico independent consultant Santiago Villareal told NGI’s Mexico GPI.
This week, NGI’s Mexico GPI also spoke to Rosanety Barrios, an expert leading the energy team for the candidacy of Mexico presidential hopeful Xóchitl Gálvez. As for the development of liquefaction plants in Mexico sourcing U.S. gas, Barrios said Gálvez would take a pragmatic, North American approach to devising energy policy.
“At this moment, President Biden is not allowing the permits for an LNG plant in U.S. territory, but at the same time Mexico is writing these permits. It makes no sense,” she said. “We need to have this regional energy policy to discuss what are the best ways that both countries can have…the highest benefits for both countries.”
Growing Grid Demands
Another major theme at the conference was artificial intelligence and growing power demand from data centers on power grids. Williams CEO Alan Armstrong said Wednesday that “electric load from data centers is going to grow threefold by 2030.”
Data centers operate 24-7 and would be a principal driver of power demand growth amid the electrification trend across North America. Lower natural gas prices and higher power demand are already leading to increased natural gas demand in electric power in North America.
With hotter weather around the corner, the market is expecting further growth.
Mexico Prices
In Mexico on Wednesday, natural gas cash prices at Los Ramones dropped 5.5 cents day/day to $1.838, according to NGI Data. Monterrey via the Mier-Monterrey system was down 5.5 cents to $1.644. Tuxpan in Veracruz via Cenagas saw the spot price fall 5.2 cents to $2.477.
Out West, the Guadalajara natural gas price fell 1.5 cents to $1.845 on Wednesday. Farther north in El Encino, prices via Tarahumara were 47.9 cents, 1.6 cents higher than the previous day. Prices at Waha in West Texas feeding this region of Mexico continue to trade in negative territory as associated gas production out of the Permian struggles to find buyers.
“Waha is negative but there aren’t a lot of changes in demand in Mexico but that could change in summer or late in summer,” Villareal said.
On the Yucatán Peninsula, the cash price at Mérida was $3.327 on Wednesday, down 4.7 cents.
U.S. Storage
On Thursday, the U.S. Energy Information Administration (EIA) reported a 7 Bcf injection into storage for the week ending March 15. The bearish figure sent prices lower.
The South Central region, close to Mexico pipelines, saw an injection of 21 Bcf that included a 16 Bcf injection into nonsalt facilities and 6 Bcf into salt storage, according to EIA.
For the week ended March 15, total working gas in the U.S. South Central region stood at 933 Bcf, up from 929 Bcf for the same time one year ago. The figure was 292 Bcf higher than the five-year average of 701 Bcf.
