Why More Gas Is Moving From California to Mexico Amid Heat

Updated on
  • Exports to Mexico have increased 45 percent in two weeks
  • California spot gas traded at a premium after heat wave

California is warning of natural gas shortages and potential blackouts this summer after a historic leak near Los Angeles. Meanwhile, more of the power-plant fuel is flowing from the state into Mexico.

Deliveries to the North Baja pipeline system in Mexico through California jumped 45 percent to 441 million cubic feet on Wednesday compared with two weeks ago, according to data compiled by Bloomberg New Energy Finance. They’re 6 percent higher than year-earlier levels, the data show.

The flows into Mexico underscore how an unprecedented leak at a gas storage complex near Los Angeles is limiting the state’s ability to build up the supplies it’ll need when this summer’s heat has air conditioners blasting and power demand surging. The region’s electricity grid manager plead with consumers just last week to conserve power as a heat wave swept across Southern California. The high temperatures caused wholesale power and gas prices to surge.

“Gas doesn’t necessarily flow where the better price is,” said Jacob Fericy, a Bloomberg New Energy Finance analyst. “Storage is pretty full, so in terms of the California system, they may only be able to take what they need on a daily basis, so there is no guarantee that gas will even be able to flow to California.”

Storage Constraint

Sempra’s Southern California Gas utility is “not delivering any gas supplies into the North Baja system to find its way into Mexico,” and it hasn’t had difficulty finding enough amid the hot weather, Rodger Schwecke, the company’s vice president of transmission and storage, said Thursday by phone.

The ability to store excess gas in Southern California is constrained after a nearly four-month natural gas leak at Sempra Energy’s Aliso Canyon facility took the field offline. It was the biggest such leak in U.S. history, according to the National Oceanic and Atmospheric Administration and the University of California at Davis.

With Aliso Canyon crippled, California officials have said the state could face short-term blackouts on as many as 14 days this summer as power plants could run out of the fuel during high demand periods.

The California Public Utilities Commission said in a report released Wednesday that it had ordered SoCalGas to find a way to increase the withdrawal capacity at Aliso Canyon in order to avoid the risk of curtailments to power generators.

As for Mexico, the country is seeing higher demand for gas as power plants burn more of the fuel instead of oil, said Fericy. “There is more power generation demand than there was last year,” he said.

(Updates with utility comment in fifth paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE