Mexico mulls alternatives to natural gas for power generation

Faced by lagging natural gas production and a fast-rising bill for imports, Mexico is seeking alternative fuels for power generation, an energy ministry official said. The alternatives being looked at in a policy review include fuel-oil, petcoke and refinery residuals, the official added.
State-owned oil and gas company Pemex currently produces just over 4.6 bn cfpd of gas, still below the level of five years ago and well short of the target of just under 6 bn cfpd set for the end of 2006.

For the first time, Mexico last year imported more than 1 bn cfpd of gas, 17 % above 2003 levels, and all of it from the US. The gas import bill in 2004 came to $ 2.443 bn, a hike of 31.3 % and accounting for more than a quarter of the nation's overall trade deficit.
Meanwhile, spurred by growing consumption from the electricity industry, Mexico's gas consumption grew by 8 % in 2003 and only slightly less in 2004. With prices and consumption continuing to rise, Mexican industrialists are clamouring formeasures to cut their fast-rising costs, while domestic gas consumers have already been given a small subsidy.

As the subsidy was announced, Energy Secretary Fernando Elizondo explained how the country came to be so dependent on natural gas imports. Ten years ago, when the decision was taken to go for gas-fired combined-cycle plants, natural gas prices were low, the nation's pipelines had excess capacity and the government was under heavy pressure to clean up the environment.
"None of that holds true now," he added.

Gas prices are high, pipeline bottlenecks plague distribution, and new technologies mean that other fuels can be environmentally friendly too.
Mexico is planning a 60 % increase in electricity generating capacity by 2012, with gas's share of the total rising from a quarter to more than half.