Total gas supply to Mexico fell by 4% y/y to 5.38 bcf/d in February due to rapidly declining domestic production, but LNG imports posted their largest y/y increase in nearly a year.
Aggregate gas demand continued its y/y decline in February, falling by 0.77 bcf/d to 4.78 bcf/d, which is the lowest since at least 2011. In an ongoing trend, the sharpest drop was in the power sector, where demand fell to 0.89 bcf/d, down by 0.46 bcf/d y/y. Gas-fired generation was down by 0.70 TWh y/y to 9.42 TWh—the lowest in two years. Nearly all sources of power generation slipped in February with lower aggregate power sector demand, although nuclear and steam generation rose, as they have for the last several months. For the first time in two years, industrial gas demand fell y/y at 1.12 bcf/d. We believe that SENER data is likely to be underplaying aggregate gas demand in Mexico, which is connected to what appears to be consistent underreporting of US pipeline imports.
In February, total supply was 5.38 bcf/d, down by 0.25 bcf/d y/y according to SENER data. Mexico logged the largest y/y increase in LNG exports since May 2016, growing by 0.23 bcf/d to 0.43 bcf/d, and pipeline imports were up by 0.31 bcf/d y/y to 2.14 bcf/d. But rising imports once again did not fully offset the declines in domestic production, which fell by 0.56 bcf/d y/y to 3.24 bcf/d. Indicative US pipeline data suggest that February US exports to Mexico were even higher at 3.99 bcf/d, showing a larger 0.63 bcf/d (19%) y/y increase. The gap between indicative US pipeline exports and SENER imports numbers has progressively widened since January 2015 as total flows have risen and was 1.84 bcf/d in February.
Maintenance has curbed imports through the 2.1 bcf/d capacity NET Mexico pipeline since 15 April. US pipeline exports to Mexico slipped by around 1.1 bcf/d w/w to an average of 2.5 bcf/d, down by 1.0 bcf/d y/y. Pemex reported that it imported two cargoes in early April from the US Sabine Pass facility through its Altamira LNG terminal to help offset the drop in supply. LNG imports through Manzanillo have also continued as both the north and south segments of phase two of the Los Ramones pipeline were operating at just 0.4 bcf/d (less than 30% of the 1.4 bcf/d nameplate capacity) at the start of 2017 due to continued technical faults. No further updates have changed that status. Another new pipeline, the 1.12 bcf/d Impulsora Pipeline, asked FERC for more time to complete the border crossing facilities for its pipeline from Webb County (Eagle Ford) to the Mexico border, which pushed the in-service date from 1 June to the end of 2017. This has not significantly shifted our forecasts for Mexican imports as we expect the main constraining feature in 2017 to be sufficient take-away capacity on the Mexican side of the border. We expect US exports to Mexico to grow y/y by 0.73 bcf/d on average over 2017.