Increased dangers for American consumers as Mexico expands LNG infrastructure with U.S. gas

North America is currently experiencing a boom in its liquefied natural gas (LNG) industry, which is raising concerns about the long-term stability of the continent’s gas and electricity markets. Just a few years ago, in early 2016, there were no active LNG export terminals in North America. However, the landscape has changed drastically since then, with the United States emerging as a dominant player in the global LNG export market. In fact, the U.S. has surpassed industry giants like Australia and Qatar, taking the lead in 2023 and further expanding its dominance in 2024. The country now boasts eight massive LNG export terminals, capable of shipping out nearly 15 percent of its total gas production.

Mexico, a significant player in the North American energy market, has also entered the LNG arena with one terminal already operational and another project currently under construction. Additionally, plans are in place for the development of multiple new LNG projects along the U.S. Gulf Coast and Mexico’s Pacific coast. This surge in LNG exports has exposed North America to the heightened volatility and increased prices of global gas markets, posing significant risks to the stability of the region’s energy landscape, particularly in Mexico.

The potential consequences of ramping up LNG exports are particularly concerning for Mexico. Increased LNG exports are likely to drive up the cost of both gas and electricity in the country, creating a more volatile market and undermining the predictability of energy prices for Mexican businesses. Moreover, the global LNG market is at risk of oversupply in the near future, presenting market uncertainties for new LNG projects in Mexico. External factors, such as extreme weather events, regulatory changes, and market manipulations, could also disrupt proposed Mexican LNG projects, highlighting the vulnerability of the industry to forces beyond Mexico’s control.

Analyses conducted by U.S. government agencies and independent experts consistently point to the potential for growth in U.S. LNG exports to raise wholesale gas prices in the interconnected North American gas market, affecting both the U.S. and Mexico. This could lead to a significant wealth transfer from gas purchasers, including homes, businesses, and electric utilities, to oil and gas producers, primarily based in the U.S. Despite the industry largely remaining silent on these risks, it is crucial for Mexican gas consumers and policymakers to be fully aware of the threats that LNG exports pose to the stability of North American energy markets. Caution is advised regarding the LNG industry’s intentions to construct additional export terminals in Mexico.