Page 6 - NorthAmOil Week 07 2021

NorthAmOil COMMENTARY NorthAmOil

Winter storm in Texas has

repercussions further south

Mexico suffering gas and electricity shortages after harsh weather

interrupts pipeline deliveries

US-MEXICO TEXAS is unique among US states for having a push to acquire LNG in such a short amount
transmission grid that operates in isolation, sep- of time is unusual. This type of fuel is typically
WHAT: arate from the two other linked networks that transported by long-haul tankers traversing the
Disruptions in US gas provide electricity to most parts of the US and open seas at speeds of less than 20 knots, so it is
supplies have triggered Canada. However, the severe winter storm that not always easy to acquire at short notice. But
fuel and power shortages has been causing blackouts all over the state did the atypical circumstances are an indication of
in Mexico. not occur in isolation, and its consequences have the urgency of the matter.
not remained in isolation either.
WHY: Mexico can certainly testify to that fact. On Spreading shortages
Mexico’s gas and power February 15, customers of the Federal Electric- And urgency has hardly been in short supply this
providers both depend ity Commission (CFE), the country’s govern- week. The outages reported by CFE on Febru-
on deliveries from the ment-controlled power provider, reported that ary 15 soon spread beyond northern Mexico. As
Permian basin. 4.77mn businesses and homes in the Mexican of February 17, they had spread to 29 Mexican
states of Nuevo Leon, Tamaulipas and Chi- states and were affecting Mexico City, which
WHAT NEXT: huahua had lost power. The outages occurred is nearly 1,000 km away from the border with
CFE will look more closely because cold weather in Texas and other parts Texas. This is hardly a surprise, given that 40%
at gas storage options, of the US led to a reduction in the volume of US of the country’s electricity supplies come from
and the president may natural gas delivered to Mexico by pipeline by combined-cycle thermal power plants (TPPs)
have to reconsider his around 1bn cubic feet (28.32mn cubic metres) that use gas as fuel.
predecessor’s plan for per day, the utility explained. At the same time, though, gas shortages have
large storage depots. According to Argus Media, US shipments also been spreading. The cuts in pipeline sup-
dropped partly because the winter storm forced plies have not just caused problems for CFE;
some of the Permian basin fields that supply gas they have also hit Cenagas, Mexico’s national gas
to Mexico to halt production and also caused concern. Like CFE, Cenagas has set up its own
a number of gas pipelines to freeze. However, pipeline network with a capacity of 7 bcf (198.2
volumes are not likely to rise quickly, given that mcm) per day to import fuel from the US, and
Texas Governor Greg Abbott ordered local pro- as a result it too has been running low. Texas Governor
ducers not to sell any of their gas outside the As a result, the gas company has had to ration
state until February 21. supplies. As of February 17, it had reduced the Greg Abbott
total volume of gas delivered to its domestic ordered local
Emergency LNG imports customers via pipeline by about a third. It cut
Sources with knowledge of the matter told deliveries to all customers by around 30% on producers not
Bloomberg on February 15 that CFE had average, though the actual extent of individual
responded to the initial drop in pipeline imports curtailments ranged between 16% and 99%, to sell any of
by abruptly calling a tender to seek a supplier depending on the customer involved.
of LNG. They did not specify how much LNG their gas outside
the company hoped to buy, but they did report Impact on business the state until
that the winner of the bidding contest would be These reductions have affected a number of
required to deliver the fuel before the end of the major industrial consumers, including plants February 21.
week. owned by the Mexican automotive parts man-
CFE divulged a few more details of its plan ufacturer Nemak, the automobile manufac-
on February 17, saying that it had tendered turer Volkswagen (Germany) and the steel
contracts for the purchase of four LNG cargoes producer Arcelor Mittal (India). The impact
since February 12. It also said it had taken deliv- is not evenly distributed, however. According
ery of the equivalent of 450 mmcf (12.74 mcm) to Cenagas, some manufacturing facilities in
of gas at the Altamira and Manzanillo LNG ter- northern Mexico – including Manufacturas
minals on February 16. Vitromex, a maker of glass, and GCC Cemento,
In any case, it bears mentioning that CFE’s a manufacturer of cement – had seen delivery

P6 www. NEWSBASE .com Week 07 18•February•2021