miércoles, 3 de julio de 2013

miércoles, julio 03, 2013

July 1, 2013 6:49 pm
 
US gas exports give Mexico competitive edge over other countries
 
 
The US shale gas boom is shaping up to be an important competitive advantage for manufacturers – in Mexico.
 
US natural gas exports to Mexico hit a record last year, helping hold down the country’s energy costs as its industry grew rapidly.

Planned new pipelines that will enable further rapid growth in imports from the US will strengthen and lock in that advantage, and help to give Mexico a competitive edge over other emerging economies for as long as North American shale production remains strong.

China’s manufacturing labour costs overtook Mexico’s last year because of its high rates of wage inflation, and its energy costs are also significantly higher.

By 2015, China’s total manufacturing costs will be about 95 per cent of US levels, with gas contributing about 4 percentage points of that, while Mexico’s will be just 89 per cent, with gas at just 1 percentage point, according to new research from the Boston Consulting Group.

Mexico’s industrial output has been falling this year, but its lower costs and proximity to the US, which reduces transport costs and increases flexibility, will make it increasingly competitive as a manufacturing location, analysts say.

Companies including Honda and Nissan, the Japanese car manufacturers, and last week General Motors of the US, have recently announced new investments in Mexico, and Hal Sirkin of BCG said he expected more to come.
 
“We may not have really seen it in the investment data yet, but Mexico is being discussed in boardrooms, and it’s looking attractive,” he said.

US gas exports to Mexico rose 19 per cent to 620bn cubic feet last year, meeting about 20 per cent of the country’s demand. Domestic production has been in decline because of under investment by Pemex, the national oil company.
 
At that rate, the pipelines from the US to Mexico were full, forcing the government to import expensive liquefied natural gas, which costs more than four times the benchmark US gas price of about $3.60 per million British thermal units.

However, Mexico plans to more than double its import capacity from the US with the Ramones pipeline project, its biggest energy infrastructure development for 40 years. Phase one is planned to be in operation next year.

Maria Jose Hernandez of the consultancy Eurasia Group said: “The government has resorted to the more costly LNG imports, subsidising them to an extent but also rationing supply as well; a fix insufficient to satisfy industrial demand. Imports from the US are much cheaper, so there is a tremendous economic incentive to build new pipelines.”

The North American Free Trade Agreement means US companies seeking to export gas to Mexico do not face the same regulatory hurdles as proposed LNG plants seeking to export gas to countries without a trade agreement.

The Eurasia Group warned that a steep increase in US exports to Mexico could make North American gas prices more volatile, if the US did not develop its own pipelines and other infrastructure to keep pace with growing demand.

The prospect of increased competition from companies enjoying the benefit of low North American gas prices is one reason why China has been attempting to develop its own shale gas resources. However, it is hampered by its lack of rigs and other production equipment, water for hydraulic fracturing, and infrastructure to process and transport the gas.

The government has set a target of reaching about 230bn cubic feet of shale gas production in 2015, and up to 3.5tn cu ft in 2020, but the China Greentech Initiative, a consortium of Chinese and international researchers, argued recently: “shale gas development is unlikely to meet the government’s targets on schedule”.

Future Mexican demand for US gas depends on how quickly it can get its own shale gas production going. Enrique Peña Nieto, the president, plans to open up Pemex to foreign capital to boost exploration and production of unconventional resources, including shale gas. Mexico is sitting on an estimated resource base of 115bn barrels of oil equivalent, comparable to Kuwait.
 
As in China, however, issues of drilling and hydraulic fracturing capability in the oil
and gas industry, water, and pipeline infrastructure present challenges to development.

 
Copyright The Financial Times Limited 2013.

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