By Claudia Espinosa, Editor Energy Mexico, ICIS
- ICIS, Mexico regulator indications stay in range of each other
- Early 2021 gas marketing starts slowly after record Q4 ’20
- Volumes of gas marketed likely to increase in the coming months
HOUSTON (ICIS)–First-quarter 2021 marketed natural gas transactions and volumes are so far down on the year after a record-breaking Q4 ’20 period. Still, upward revisions to GDP forecasts and the peak summer demand season mean greater future consumption.
Gas marketers delivering into Mexico reported 516 transactions in January and February versus 611 for the same two months of 2020, right before the first coronavirus case was reported in the country. This according to data available from energy regulator CRE.
An increase is likely for the following months of data as economic activity increases and the peak summer demand season approaches—electricity demand for cooling ups plants’ gas demand most from late May to September.
July, August, and September are usually when gas consumption increases most, and with more vaccinations being distributed, the economy and energy consumption are expected to grow through the rest of 2021. These barring circumstances like a lack of effectiveness of vaccines against possible new coronavirus strains.
Q4 ’20 record
Transaction and volume numbers for gas marketed in January and February were down from the same months last year after a record number of transactions were visible for November and December 2020. This as the economy recovered from its worst GDP drop on record during the Q2 ’20 lockdown.
Transactions of nearly 350m GJ of gas were present during the first two months of 2021, a figure below the prior two years but still above 2018.
Gas consumption will most likely increase incrementally in April and jump in late May to usual peak summer levels. This may mean total volumes marketed could end up reaching or surpassing the 2019 record.
Prices to fall despite Feb freeze
CRE’s national IPGN gas price data spiked in February because of the unusual market conditions. Notably, caused by the winter emergency in the key supplier state Texas.
ICIS locational gas price indicator (LGPI) data shows CRE’s average regional indicators for three demand centres reflect market fundamentals despite liquidity issues. Mainly, caused by a lack of implementation of open access rules and unresolved right-of-way conflicts for connecting pipelines. The administration will unlikely solve these issues this year.
Late 2020 and early 2021 ICIS LGPI figures for Monterrey, Mexico City, and Guadalajara remained in close proximity to regional IPGN figures from CRE. CRE bases its figures on data from gas marketers active in Mexico.
CRE’s early 2021 IPGN figures averaged from monthly transactions reported by marketers show the industrial states in Region III continue to pay low prices.
The January IPGN for Monterrey was $3.18/MMBtu. It also climbed to a record-breaking $19.63/MMBtu during February because of the winter emergency.
The ICIS LGPI shows that under more normal market conditions, Monterrey’s prices would have been around $2.92/MMBtu in February.
The number of transactions executed in January and February in CRE’s Region III was up by seven from last year. Besides, reached 109, boosted by a greater number of transactions reported in February. Total volumes also increased during the year.
The ICIS January LGPI for Mexico City of $3.74/MMBtu averaged within 3% of CRE’s IPGN of $3.86/MMBtu for Region V, including Mexico City as well as ten small surrounding states. The region centered around the country’s capital continues to severely receive the impacts by coronavirus. Still, it receives the most significant volumes of marketed gas out of any of CRE’s IPGN regions.
Region V recorded a drop in transactions, and it was accompanied by a decrease in volumes as well this year. In contrast with the 257 transactions observed in January and February of last year, Region V recorded only 182 this year. Volumes fell year on year from 103.3m GJ in January and February of 2020 to just 80.8m GJ during those months this year.
In contrast, Region IV recorded a drop in transactions but increased total volumes for the first two months. For instance, from 25.2m GJ in January and February 2020 to nearly 26.3m GJ this year. The region recorded 70 transactions for the period last year and only 41 this year.
These figures match the expectation that more volumes would be marketed in this region. In fact, with greater use of the so-called Wahalajara pipe system.
ICIS’ January Guadalajara LGPI of $3.35/MMBtu was within 4% of the CRE’s January IPGN of $3.49/MMBtu for its Region IV.
Mexico’s central-west region has among the highest potential for more marketing because of Wahalajara’s idle capacity. Also, for its connectivity to industrial Guadalajara and nearby CFE power plants.