The United States Is Giving Mexico Gas

Natural GasDue to a glut in supply from their neighbors to the north, Mexican industries will be paying a lot less for electricity than they have in the past. The manufacturing industry in Mexico stands to benefit most from overproduction of natural gas within the United States. Mexico is currently paying for liquefied natural gas that can cost as much as three times the amount of U.S. imports.

The Wall Street Journal reports that a Mexican manufacturing boom, most notably in the auto industry, is the catalyst of an increased demand for natural gas pipelines to be built across the border. Mexico is sitting on its own large supply of natural gas resources; however its lack of expertise and desire to tap into the reserves has driven industries to turn to the U.S. for help. An expected total of seven new pipelines, including one that will start importing natural gas by the end of September 2014, will bring gas from Texas and Arizona to aid the demand.

Mexico’s need for American natural gas benefits the United States too, allowing the U.S. to make money from increased production. Fracking has led to an overabundance of natural gas in areas like the Eagle Ford formation in Texas, due to less than ideal trade prices. Resistance from environmental groups to proposed pipelines such as Keystone XL has made the gas industry turn to the border as an option for delivery of its production.

The Mexican automotive industry expects to become more prevalent in the coming years, sending demand for natural gas even higher. An expected five million vehicles will be manufactured by 2020. The article states,

A large source of demand is the Mexican automotive industry, which produced nearly three million vehicles in 2013. Several auto makers have opened new plants in Mexico recently, or announced plans to do so. The latest is South Korea’s Kia Motors Corp., which unveiled plans late last month to build a $1.5 billion assembly plant near the U.S.-Mexico border.

Approximately two billion cubic feet of natural gas per day, or an eleven percent increase from last year, has already flowed across the border in 2014. Mexico is moving its economy forward and driving down electric costs for the public and industry by preparing to import nearly two thirds of its natural gas supply from the U.S. over the next twenty years.

The advent of fracking, though not without its faults, has allowed the U.S. to boost its oil and gas production in recent years to never-before-seen levels. Parlaying that into more trade and commodity sales with neighbors and allies is a natural fit, as both sides benefit.





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