Page 7 - NorthAmOil Week 07 2021

NorthAmOil COMMENTARY NorthAmOil

volumes drop by 99% as of February 17. that the shortages and blackouts served to prove
Residential consumers, meanwhile, have “why Mexico must seek autonomy.”
shouldered less of the impact. Only 8.2% of
the country’s households are connected to gas Self-sufficiency and storage
pipelines, and the distributor that serves Mex- Even so, the president and his allies will prob-
ico’s northern regions, Gas Natural del Norte, ably find this goal difficult to achieve. Mexico
announced on February 16 that it would make does not produce enough gas to cover domestic
residential supplies a higher priority that com- demand, so it depends on imports – and its eas-
mercial and industrial deliveries. iest option has been to rely on imports from its
The loss of gas and power supplies has not just neighbour to the north.
been a nuisance. It has also caused the country In theory, it could seek to mitigate this
to take a financial hit. According to Index, Mex- dependence by diversifying suppliers. However,
ico’s national council of maquiladora and export this approach has a number of drawbacks, not
manufacturing industries, the industrial sector least among them the fact that Mexico has very
of northern Mexico suffered $2.7bn worth of little capacity to store gas and cannot stock up
losses over two days because of the interruptions on fuel when prices are low or when it needs to Beyond the
in electricity supplies. prepare for winter.
The country’s last president, Enrique Peña operational
Policy implications Nieto, had hoped to remedy this situation by and financial
Beyond the operational and financial disrup- calling for the construction of facilities capable
tions, the gas supply cuts may also have an of storing up to 45 bcf (1.274bn cubic metres) disruptions, the
impact on policy going forward. of gas by 2026. However, the incumbent aban-
On the one hand, they are likely to reinforce doned that plan and replaced it with a less ambi- gas supply cuts
Mexican President Andres Manuel Lopez Obra- tious initiative calling for the use of salt caverns
dor’s belief that dependence on trade and for- in Veracruz State to store 3 bcf (84.96 mcm) of may also have an
eign partners has the potential to damage the gas and for the construction of a storage depot impact on policy
country’s economy and security. The president at the Altamira LNG terminal to store another 3
certainly seemed to be leaning in that direction bcf (84.96 mcm). going forward.
on February 16, when he said: “The bet of previ- Now CFE appears to be taking the matter into
ous administrations was to buy the gas abroad its own hands, to some extent. On February 15,
and Mexico stopped producing; there was cor- it released a statement indicating that it was
ruption involved in these decisions.” devoting more attention to the country’s lack of
That is, it may lead the president to push storage capacity. “CFE will include storage in its
harder for the country to achieve self-suffi- commercial and operating strategy as a strate-
ciency in energy. He is likely to find at least gic short-term action to minimise the negative
some support for this stance. Miguel Reyes, the impacts of abrupt price fluctuations and drastic
director-general of CFE, said earlier this week variations in requested volumes,” it said.™

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