(JWN, Jim Bentein, 5.Mar.2019) — Mexico’s productivity and economic growth are at risk due to a reduced supply of natural gas for industry, a business leader warns.
Juan Pablo Castañón, president of the Business Coordinating Council (CCE), said in an interview that gas shortages are going to force factories to shut down for periods and warned that electricity prices will go up.
“Our members have expressed their concern to us about the reduction of supply by one-quarter. That’s a very significant quantity and is going to cause technical stoppages. It will also have repercussions on the cost of electricity production going into the summer,” he said.
Castañón added that if industry is forced to substitute natural gas with other fuel, costs will go up and environmental damage will increase.
He said the private sector anticipated a reduction in natural gas supplies at the start of this year but added that the situation is a “little bit more intense than we expected.”
The Mexican Employers’ Federation (Coparmex) confirmed that between July and October last year, its members received letters from state-owned Pemex, the dominant Mexican producer, telling them to limit their natural gas use due to circumstances that were beyond the state oil company’s control.
“We had to consume a reduced volume, although there was pressure [in the pipelines], the volume [of gas] was less,” said Edmundo Rodarte, head of the Coparmex energy committee.
He explained that pressure in natural gas pipelines has since dropped but Coparmex members companies have not received any further correspondence advising them to limit their gas use.
However, earlier this week the newspaper El Financiero reported that factories in central Mexico were informed by Pemex to reduce their gas consumption by just over a quarter because of distribution problems at one of its processing centers in the Gulf of Mexico State of Veracruz.
Agustín Humann, an analyst at the energy sector consultancy Marcos y Asociados, confirmed that was the case. The former president of the Mexican Natural Gas Association said the shortages were confined to the center of the country but warned that they would have a “brutal effect” on industry.
An energy consultant at the public strategy firm Mercury said it was important to put an end to the shortages quickly, warning that if they continue for a prolonged period the impact on industry will be severe.
“In the short term, a solution could be to increase natural gas liquid imports,” Arturo Carranza added.
Mexico’s natural gas production has been declining for a decade, a period during which demand for the energy source has increased. Imports have consequently risen significantly, putting Mexico heavily dependent on the United States for its natural gas needs, a situation that increases costs for industry but which is preferable to shortages.
Mexico consumes over 8 bcf/d of gas and imports more than 60 per cent.
Aldimir Torres Arenas, president of the National Association of Plastic Industries, said the lack of natural gas is already affecting the petrochemical industry. “Sometimes we don’t have the material [we need] to produce. There’s no raw material more expensive than that which you don’t have,” he said.