North America energy integration acts as 'insurance policy'

Thursday, February 2, 2017

A Mexican government official spoke at an energy conference in the country's capital about the importance of energy integration among the three signatories of the North American Free Trade Agreement (Nafta).

North America's intra-regional hydrocarbons trade has doubled since the launch of Nafta in 1994 and fossil fuels are to remain the dominant fuel for power generation to 2030 in the region, especially in Mexico and the US.

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"Energy integration strengthens North America's energy security," Aldo Flores Quiroga, undersecretary of hydrocarbons at Mexico's energy ministry, said. "Energy integration and cooperation are a good insurance policy," he added, citing examples of how the three signatories – Mexico, Canada and the US – have assisted each other in times of crisis.

In 2014, for example, when Texas suffered power grid problems, Mexico's state electricity company CFE provided additional power to its grid to prevent outages. And when Hurricane Katrina hit the US in 2005, Mexico's state oil company Pemex diverted 300,000b of fuel to help tackle shortages in the area.

Panelists also agreed US President Donald Trump's stated aim to renegotiate or even scrap the constitutes a potential threat to energy integration achieved so far.

Lucian Pugliaresi of the Washington DC-based Energy Policy Research Foundation, a non-profit organization that analyzes petroleum economics and public policy, offered some observations on what changes a Trump presidency could bring to the energy sector.

He said reforms to regulations and permitting are likely, as the Trump administration wants to move projects along more quickly and accelerate the authorization of more drilling.

Trump, he said, is also likely to be much more pro-development regarding pipeline construction, exemplified by the president's executive order, signed just days after he took office, to re-instate the Keystone XL and Dakota Access ducts. And Pugliaresi said the so-called border tax, a planned tariff on Mexican imports to pay for Trump's proposed border wall, would be "a politically difficult project to implement," and went so far as predicting that the wall will never be built.

North America is expected to become a net exporter of crude oil sometime around 2020. The three hydrocarbons-rich nations' petroleum consumption is about 22Mb/d, but total imports into the single market were around 6.5Mb/d, according to July 2016 figures from the US energy information administration (EIA).

Mexico is seen leading the three countries' energy demand growth to 2030, according to the EIA, with growth of 1.6% during the period and natural gas demand growth of 2.2%. Electricity use is expected to grow 2.6% and the population is due to grow 0.9%.