Adds details on Mexican export demand.
Texas governor Greg Abbott (R) today ordered natural gas producers to refrain from sales outside the state through 21 February in an effort to alleviate unprecedented supply pressure caused by severe cold weather.
Abbott began requiring today that gas producers that had been shipping to buyers outside of Texas divert supplies to power generators inside the state instead.
"That will increase ability of gas-fired generators to increase power sent to grid," he said in a press conference this afternoon.
If fully implemented, the move would deal a crippling blow to Mexico's industrial, automotive, and manufacturing sectors that rely on US gas supply.
But it is unclear if Abbott has the authority to order producers to disregard contracts for shipments to states other than Texas or shipments into Mexico, or for fulfilling LNG export contracts through Gulf coast terminals. Beyond commercial implications, Abbott's order could contravene bilateral trade terms in the US-Mexico-Canada Agreement (USMCA).
Limited gas supply amid wellhead freeze-offs cut power to millions of Texans this week. As of this afternoon more than 2.6mn customers across the state did not have power, according to outage tracker PowerOutage.US. Most homes in Texas are also heated with electricity, leaving many without power as well as heat during extremely cold weather that is expected to last through the weekend.
Abbott has requested all major industrial gas consumers to limit gas consumption and earlier asked Freeport LNG in Texas to voluntarily curtail its operations in order to reduce gas and power demand.
Crippling blow
Mexico buys most of the gas produced in Texas, importing it through a network of cross-border pipelines that are already running at well below capacity this week, highlighting the country's supply vulnerability in spite of vast US shale resources just over the border. Gas shortages have already caused losses of $2.7bn over two days in northern Mexico's manufacturing sector, Mexico's national council of maquiladora and export manufacturing industries (Index) said.
A Texas gas export ban "is the most transcendent piece of news in the recent history of Mexico's energy sector," Eduardo Prud'homme, former technical director at state pipeline operator Cenagas said. "There is a high possibility that this will create a critical situation."
Mexico is highly dependent on US pipeline imports with around 67pc of domestic demand — mainly for electricity generation — covered by US pipeline imports of 5.52 Bcf/d in November, according to the latest information from the US Energy Information Administration (EIA).
Mexico has 24 gas pipeline import points along its border with the US, 12 of which — including the largest capacity pipelines — are connected into Texas.
Mexican state-owned power utility CFE — an anchor shipper on a series of cross-border pipelines — and state-owned pipeline operator Cenagas — which handles around 7 Bcf/d of capacity — declined to comment on Abbott's announcement.
