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Mexico's Natural Gas Market Mechanics Designed Somewhat Like United States
April 07, 2018
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Mexico’s Energy Regulatory Commission publishes regional natural gas prices for the first time
As part of the ongoing liberalization of the Mexican natural gas market, on March 22, Mexico’s Energy Regulatory Commission (CRE) published for the first time monthly natural gas prices for six trading regions in the country. The regional prices supplement the national monthly natural gas price index, called IPGN, which was launched in August 2017.
CRE collects data for the pricing indexes based on monthly post-transactional reports that all natural gas marketers operating in Mexico are required to file. Monthly regional price indexes include the average prices paid for natural gas plus transportation costs for all transactions that took place in each region during the previous month.
The selection of regions was based on regional natural gas supply patterns, existing and in-development pipeline transportation infrastructure, prices and trading volumes reported by each state, and market shares of natural gas traders (assessed in the second half of 2017), according to CRE. Regional aggregations also considered tariff zones and flows on Sistrangas, which is the largest pipeline network in Mexico. These six regions encompass all but two (Nayarit and Baja California Sur) of the 31 Mexican states.
Average monthly regional prices for February 2018 ranged from $6.0582 per million British thermal units (MMBtu) (Region 1) to $4.2475/MMBtu (Region 3). Regions 3 and 5 reported the largest number of transactions (30 and 68, respectively) and traded volumes (45 Bcf and 55 Bcf, respectively) among the six regions, together accounting for 67% of all trades during February 2018. Region 3 includes the industrialized states of Nuevo Leon and Tamaulipas and is the main location of Mexico’s interconnections with U.S. border-crossing pipelines. About three quarters of U.S. natural gas pipeline exports to Mexico flow through this region. Nuevo Leon’s capital city, Monterrey, is likely to become the location of Mexico’s first natural gas trading hub, according to Natural Gas Intelligence. Region 5 is the location of Mexico’s most densely populated states and the largest natural gas consumption centers in the country, including Mexico City.
The six regional indexes are intended to provide general regional price information and will be replaced by spot prices from liquid trading hubs once they are developed. In addition to national and regional monthly indexes, CRE plans to publish daily forward-looking price indexes compiled from the daily trading reports. Similar to reporting monthly national index IPGN and six regional indexes, CRE will start reporting the daily regional indexes after the national daily index is launched.
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