Three new pipeline projects linking the United States and Mexico are expected to come online over the next three years. When completed, the pipelines will double the United States' natural gas export capacity to Mexico, possibly improving the cost competitiveness of Mexico's industrial, electricity and broader energy sectors by mitigating natural gas shortages and reining in spiking electricity prices.
The Northwest pipeline system will cover about 2,000 kilometers (1,250 miles) and transport some 21.5 million cubic meters of natural gas per day from near Tucson, Ariz., down Mexico's western coast to Mazatlan. The expanded Chihuahua pipeline will transport roughly 24 million cubic meters of natural gas per day 400 kilometers from the U.S. border to El Encino in central Chihuahua state, where another 530-kilometer-long pipeline will connect the system to the Northwest pipeline system at the Sinaloa city of Topolobampo. Lastly, the 1,200-kilometer-long Los Ramones pipeline will bring some 59.5 million cubic meters of natural gas per day from Texas and Louisiana to Mexico's emerging manufacturing zone in the central states. Total investment in these projects is expected to be around $8 billion, and the pipelines will increase annual import capacity by more than 36.5 billion cubic meters.
Once operational, the three pipelines will reduce pressure on Pemex to increase natural gas production, freeing the company to focus attention on boosting upstream oil production. Even if Mexico makes progress in reforming its energy sector, it would be years before the country could provide enough natural gas domestically to satisfy growing demand. Barring a massive technological development or a glut in global liquefied natural gas supplies that leads to a significant drop in the price of liquefied natural gas, Mexico will continue to look to the north to meet its growing demand for cheap, pipelined energy.
