Boston, MA -- (SBWire) -- 10/02/2013 --Ambitious plans to ramp-up capacity, access to cheap US natural gas and a booming manufacturing industry are all factors that support our buoyant outlook for the Mexican power sector. While we note that plans to exploit yet greater volumes of US gas could leave Mexico vulnerable to longerterm fluctuations in gas prices, such exposure is currently boosting Mexico' competitiveness and pushing down electricity costs for manufacturers. Furthermore, while the uncertainty surrounding energy sector reform is regarded as a risk to our outlook, if President Pena Nieto can liberalise the segment, enabling the country to tap its huge domestic shale gas resources, then our outlook for Mexico could grow brighter still.
We have upwardly revised our forecasts for power generation and consumption in Mexico this quarter, based on the convergence of a number of positive industry-specific factors and macroeconomic fundamentals. While BMI's Country Risk team forecasts a slight dip in GDP growth to 3% in 2013, they are broadly optimistic with regards to Mexico's longer term economic trajectory, and anticipate GDP growth to average just under 4% through to the end of our forecast period in 2022. Our growth projections for both the broader economy and the power sector are underpinned by Mexico's booming manufacturing sector, increasingly strong private consumption and favourable demographics. From a power sector perspective, we would also add access to cheap US natural gas to this list.
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To this end, there has been much talk about the positive outlook for the Mexican economy in recent months, particularly as the country attempts to position itself as a low-cost manufacturing hub capable of rivalling China. To this end, we expect to see a great deal of new gas-fired capacity come online over our forecast period and highlight significant opportunities for investment in midstream infrastructure - as pipelines between southern states in the US and Mexico start to enter the construction phase and come onstream. We forecast that gas-fired electricity generation will grow at an annual average rate of just under 6.5% between 2013 and 2022, accounting for 60% of generation capacity at the end of our forecast period and driving our forecasts for growth in electricity generation.
Key developments this quarter include:
- Exports of natural gas from the US grew by a huge 24% in 2012, according to Energy Information Administration (EIA) data. The surge in demand was driven by growth in industrial production, with imports hitting the highest level since records began in 1973. The EIA estimates that despite Mexican gas consumption having grown by an average of 4% per year between 2007 and 2011, annual average gas production has only grown at 1.2% over the same period - highlighting Mexico's reliance on imported US gas.
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Recent Study: Mexico Power Report Q4 2013
New Energy market report from Business Monitor International: "Mexico Power Report Q4 2013"