Enterprise Is the Latest to Bet on Mexico’s Thirst for U.S. Gas

  • Company expanding in energy-rich play of Texas, New Mexico
  • Build-out will allow more U.S. natural gas to flow to Mexico

In two years, pipeline giant Enterprise Products Partners LP will be capable of processing 800 million cubic feet of natural gas a day in an energy-rich stretch of West Texas and southeastern New Mexico known as the Delaware Basin -- 20 times what it could handle in 2012.

Behind this rapid expansion in one of America’s most prolific oil and gas plays is a big bet on a different market: Mexico. Once Enterprise removes liquids from the gas in the basin, the fuel will flow into pipelines delivering supplies to the southerly neighbor, among other places, Enterprise spokesman Rick Rainey said by phone Monday.

Enterprise is “going to service the burgeoning demand for natural gas in Mexico,” Ed Hirs, an energy economist at the University of Houston, said by phone. "They are staking a claim to the market."

The Houston-based company won’t be the only one. Spectra Energy Corp., Sempra Energy and TransCanada Corp. are also involved in multibillion-dollar projects that will help bring more shale gas to Mexico, creating a new outlet for the glut of supply that has been pooling up in the U.S. Their investments are a testament to the shift in Mexico’s energy industry since the country opened markets to private spending in 2013.

Enterprise’s expansion includes a new gas-processing plant anchored by long-term commitments from an unnamed producer. Rainey declined to say how much the company is spending on the build-out.

Stacked Plays

Enterprise has yet to decide where to build the processing plant, which will handle 300 million cubic feet a day. It is the third gas-processing complex of its kind that Enterprise has announced in less than two years. The company’s South Eddy facility in New Mexico began service earlier this year and a joint-venture processing site in western Texas is set to begin service in the third quarter.

“Producers in the Delaware Basin need access to the markets for their products, and what we are doing is providing them with this infrastructure that’s going to allow them to do it," Rainey said. "One of those markets, of course, is Mexico."

The Delaware Basin is part of the Permian, the most prolific U.S. oil-producing region which also boasts rich deposits of gas and natural gas liquids, according to the U.S. Energy Information Administration. Because of its multiple geologic zones at differing depths known as “stacked plays,” the Delaware offers years of drilling opportunities and superior economics, Rainey said.

Liquid Demand

"There is an increased demand for natural gas and the NGLs can be recovered and consumed locally by the petrochemical companies on the Gulf Coast or exported," Darryl Rogers, a managing director at IHS Energy in Houston, said by phone. "Enterprise has an export terminal, and they would love to export more NGLs across it."

U.S. gas exports to Mexico are set to increase because of growing power demand and flat gas production in Mexico, the EIA said in a report this month. U.S. net natural gas exports to Mexico may reach 6 billion cubic feet a day by 2026 from 2.9 billion last year, according to Rogers.

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