Energy is the backbone of the relationship between the United States and Mexico. In fact, the U.S. shale revolution cannot be fully understood without recognizing Mexico’s role as an important importer of U.S. energy and Mexico’s growing demand for natural gas.

Here are five facts you may not have known about this critical trading relationship with our neighbors to the south:

1. The U.S. has been a net exporter of natural gas to Mexico since the 1990s

   The United States is close to achieving the status of net energy exporter, but U.S. natural gas exports to Mexico via pipeline have been a critical part of the energy landscape for the past three decades. Exports to Mexico have increased significantly since 1999 and ramped up in 2010, in line with the U.S. shale revolution. According to the latest data, the U.S. shipped a record high of 1.864 trillion cubic feet of natural gas via pipeline in 2019.

   

   Source: EIA (exports and imports via pipeline)

2. 43% of U.S. natural gas exports go to Mexico

   Mexico is the number one destination of U.S. natural gas exports. However, the proportion of the total exports is particularly significant. If we add up natural gas exports to Mexico via pipeline and liquefied natural gas (LNG), it equals 43 percent of total exports in 2019.

   This trend will likely increase as more energy infrastructure projects planned between both countries are built. In addition, LNG exports to Mexico via vessel or truck have ramped up since 2017, although the majority of exports come via pipeline.

3. Mexico’s growing natural gas demand played an important role in the U.S. shale revolution

   Over the last two decades, Mexico’s natural gas demand grew at an annual rate of almost 4%. Three main factors have driven this significant increase: higher electricity demand as a result of a growth in national income; liberalization of the Mexican electricity market since 1992; and more attractive prices compared to other alternatives for power generation, such as fuel oil. Today, 67% of Mexico’s national consumption of natural gas is satisfied by U.S. imports.

   

   Source: Energy System (Sistema de Información Energética)

   Mexico’s growing demand — coupled with declining domestic natural gas production — was the perfect outlet for U.S. shale gas, particularly supplies in Texas (where the shale revolution began) that could easily be transported via pipeli

4. Mexico’s transition to natural gas has led to a tripling of its import capacity from the U.S.

   Since 2011, Mexico has sought to transition the power-generation sector to natural gas and has prioritized the construction and strengthening of its pipeline network to secure adequate natural gas supply from the United States. This policy was ramped up in 2013 with the opening of the Mexican energy sector to private investment, launching intensive efforts to build sufficient natural gas infrastructure that could take advantage of low-cost natural gas from the United States, particularly Texas. Since 2012, 8 new cross border pipelines have become online, tripling Mexico’s natural gas import capacity.

5. Mexican energy reforms have encouraged both American and Mexican companies to invest in cross-border energy infrastructure

   In 2013, after 80 years of a state-controlled monopoly, the private sector was finally allowed to invest in most energy related matters in Mexico, including natural gas infrastructure. For instance, IENOVA, a subsidiary of the San Diego-based company Sempra Energy, has built or supported several pipeline projects in Mexico. These include the Sur de Texas-Tuxpan pipeline in Mexico, connected to the Nueces-Brownsville pipeline, with a capacity of 2.6 bcf/d of natural gas, as well as the Los Ramones Phase I pipeline, connected with the Aguadulce-Frontera pipeline on the U.S. side, which has supplied Mexico with natural gas from the Eagle Ford Shale.

   Likewise, Mexican companies have played a key role in developing infrastructure on the U.S. side, facilitating cross-border capacities to supply Mexico’s increasing natural gas demand. Pipelines in the U.S. that were supported by Mexican firms include the Trans-Pecos Pipeline, the Comanche Trail pipeline and the WAHA Header owned by the Mexican Carso Energy, as well as the 200-mile Roadrunner pipeline, owned by the Mexican Fermaca, connecting with the Tarahumara gas pipeline, the second largest integrated natural gas network in Mexico.

    

   These facts demonstrate that a strong trading relationship between the United States and Mexico is critical for the long-term health of the energy sector, especially Texas oil and gas.