Mexico In Talks with US Storage Providers to Set Up Gas Reserve

(Reuters) — Mexico is in talks with U.S. storage providers to create a strategic gas reserve that could be used in emergencies, an official with the country's state power utility said, after a 2021 cold snap left businesses in northern Mexico without gas.

Mexico relies on the United States to meet about 80% of domestic gas demand, and experts and companies have warned President Andres Manuel Lopez Obrador's government about the need to increase storage before the winter.

Lack of infrastructure limits Mexico's ability to maintain enough inventories that could be used for saving surplus gas and draining stocks.

"We're aware that a low-temperature event is possible," Aniel Altamirano, deputy chief executive officer of CFE International, a unit of power utility Comision Federal de Electriciad (CFE), said on the sidelines of the U.S.-Mexico Natural Gas Forum in San Antonio late on Wednesday.

"What we're evaluating right now are storage options in the United States to reinforce our strategy," he said.

Mexico has two terminals capable of jointly storing the equivalent of four cargoes of LNG, but that is a tiny fraction of the 6 billion cubic feet of gas the country imports every day.

Around the middle of this year, CFE imported an LNG cargo and stored the gas at the Altamira regasification terminal on Mexico's Gulf Coast.

A second cargo is expected to arrive soon in the Manzanillo LNG terminal on Mexico's Pacific Coast to complete an initial stock for this winter, Altamirano said.

"In February 2021, CFE was able to continue generating (power) because besides having coal-fueled plants, we also bought LNG cargoes during those weeks," he added.

The emergency cargoes last year were supplied by trading firms including Trafigura, helping overcome a crisis in Mexico triggered by frozen pipelines, rocketing gas prices and an order by the Texas government to suspend U.S. gas exports during the freeze.

The next step for securing a gas reserve big enough for Mexico to manage a similar weather event would be to hire storage in the United States in caverns or a site protected from the cold by insulated tanks and pipelines, Altamirano said.

"Storage would work not only from the security perspective but also from the operational point of view for handling CFE's daily oscillations (in power generation)," he added.

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