Expansion of LNG infrastructure in Mexico may lead to increased risks for consumers in the United States and Mexico.

A recent study has highlighted the potential risks associated with the growing liquefied natural gas (LNG) industry in North America, particularly concerning how it could impact the stability of the region’s gas and electricity markets. The report specifically points to Mexico’s LNG sector as being at risk due to its dependence on the United States for natural gas supply that is destined for Asian markets.

In recent years, there has been a surge in the construction of LNG facilities in Mexico that are susceptible to potential market manipulation, trade disruptions, and extreme weather events that could impede their access to gas. This vulnerability underscores the need for Mexican policymakers to closely monitor the developments in the LNG industry, especially as the sector expands with new projects proposed along the U.S. Gulf Coast and Mexico’s Pacific coast.

The report emphasizes that the rapid growth in LNG exports from North America has exposed the region to the risks of increased price volatility and market instability. With the U.S. opening eight large-scale LNG export terminals and Mexico following suit with the operation of one terminal and the construction of another, there is a pressing concern about the potential negative impact on consumer prices and energy market stability.

Clark Williams-Derry, an energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA) warns that Mexican consumers could face higher and more fluctuating prices for gas and electricity as a result of the LNG boom. He also cautions Mexican policymakers about the risks associated with the expansion of the country’s LNG export capacity, particularly in light of the oversupply and saturation of global LNG markets.

The U.S. LNG industry’s focus on Mexico’s Pacific coast as a strategic location for new export facilities raises concerns about the consequences of facilitating increased gas exports. As industry players eye the construction of additional export terminals in Mexico, there is a real possibility of disrupting the country’s energy markets and exacerbating price volatility for consumers.

Overall, the report highlights the need for vigilance and caution in the expansion of the LNG industry in Mexico, given the potential risks of market disruptions, price fluctuations, and reduced profitability in an oversupplied global LNG market. By staying informed and aware of these challenges, Mexican policymakers can make informed decisions to mitigate the risks associated with the LNG buildout in the country and safeguard the interests of consumers and the stability of the energy market.