| VIEW FROM THE TOP
NATURAL GAS, A MEXICAN PRIORITY HÉCTOR MOREIRA Commissioner at CNH
Q: How would you characterize the relationship between
slightly higher prices, but in this way, the money returns
Mexico’s natural gas production potential and demand?
to the national economy and helps spawn new value
A: Mexico’s relationship with natural gas is characterized
chains to meet supply.
by its location. The country has great natural gas
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resources and so the production of natural gas should
The petrochemical industry must also be considered.
be high, but we are in close proximity to the world’s
Mexico imports dry gas from the US but Veracruz
cheapest natural gas market, the US, and can buy at
produces gas containing components, including ethane,
very cheap prices. The availability of cheap natural gas,
propane and butane, which can be used to supply the
together with the existence of oil in Mexican territory,
country’s petrochemical industry. Mexico’s petrochemical
has offered little reason to invest in Mexico’s natural gas
industry can only grow with the aid of the gas industry;
industry across the years. This underinvestment has led to
it is a consequence of producing gas here. The financial
underdevelopment. This made sense in purely economic
benefits and long chain of the petrochemical industry,
terms: the profitability of oil is higher. But this situation
including job creation and tax generation, cannot be
also made Mexico dependent on the US, and as cheap
ignored. Carrying on the status quo of imports should
gas means cheap electricity, this dependence will only
be reassessed. We must consider the opportunity cost
grow. Mexico was originally importing 20 percent of
of not developing the petrochemical industry in Mexico.
its natural gas needs. Today, it imports 70 percent: the country depends more on US natural gas than Japan, a
To promote the growth of natural gas in Mexico, CNH
country with no natural gas reserves. While Japan has
is speaking to the Ministry of Energy and the Ministry
various providers, Mexico has only one.
of Economy, which are responsible for economic development, to communicate our ideas. We are also
Q: How does CNH view the role of natural gas within
holding meetings with Congress and have just finished a
Mexico’s energy matrix?
natural gas training seminar for the country’s senators.
A: CNH is concerned about the role of natural gas within
Recently, PEMEX has begun prioritizing gas fields to
the Mexican energy matrix. In 2018, the Commission
support its overall production goal. Investment into Ixachi
published a book titled The Natural Gas Sector: Proposals
is one such example and shows a movement toward
for the Development of the National Industry to explain
parity between fuel types.
the country’s situation and to offer ideas on how we can produce more gas. However, CNH cannot set strategies,
Q: How can land use legislation be improved to help
we can only advise. Therefore, we must try to convince
develop natural gas production?
SENER that thinking regarding the price of gas must
A: Studies show that Mexican states with natural gas
not be based on the US price at the point of sale. While
develop faster than those without, which means that
the initial price may be cheaper, the overall difference,
states like Oaxaca and Chiapas will struggle to grow if the
once the gas has been transported into Mexico, may not
federal government cannot deliver natural gas to them.
be great when compared to the price of Mexican gas,
Mexico needs to update its legislation regarding land use.
which can be fed into the network immediately. There
The Energy Reform entitled landowners to receive rent
are also other factors to consider. Buying gas from a
payments from oil and gas companies using their land.
Mexican company generates profits that can be taxed, in
But in Mexico, these matters are complicated because
addition to the salaries of the company’s employees and
there is no property census to adjudicate unquestioned
the revenues of its suppliers. Local production creates
land ownership. The US has a sound land ownership
additional revenue that must be considered within the
model with good records, even if land is owned by groups
price comparison. This may require that we sell gas at
or communities rather than individuals.
