The U.S.-to-Mexico LNG export story doesn’t seem to be changing anytime soon as analysts expect U.S. exports to grow to nearly 9.3 billion cubic feet per day (Bcf/d) by 2023. From that, 2.7 Bcf/d is expected to go directly to Mexico.

During S&P Global Platts’ webinar “Demand Beyond the Border-Mexico and LNG Exports” on Aug. 15 analysts warned that the lack of capacity utilization from U.S. export corridors like West Texas and the southwest region has become critical to this story.

“These export corridors are going to be incredibly important for maintaining a well-balanced gas market in the U.S. and will be integral to the overall growth of the U.S. gas market,” Ross Ryeno, senior energy analyst for S&P Global Platts Analytics, said.

In August, U.S. exports to Mexico hit 5 Bcf/d due to the commencement of some new cross-border systems. Behind most of that growth has been the Los Ramones pipeline in South Texas with 2 Bcf/d.

But on Mexico’s side maintenance, along with other factors, have delayed pipeline projects causing fluctuating utilization percentages despite there being substantial U.S. gas capacity, according to S&P Global Platts energy analyst John Hilfiker.

“The other corridors from the southwest region and West Texas have not provided a robust amount of export growth in spite of having the cross-border capacity in place,” he said. “So that phenomenon is really occurring because of the lack of infrastructure growth downstream in Mexico.”

Looking at LNG export facilities, Hilfiker found utilization to be quite variable amongst the terminals depending on the season. Sabine Pass, which is run harder in the winter to come off strong in spring for maintenance, has seen about 60% of its overall volumes come from the Transco interconnection despite having other important supply lines such as Trunkline, TETCO and NGPL.

“This past winter we had utilizations break above 110% of nameplate capacity in March and then dip back below down into just around 90% of capacity in May and June,” Hilfiker said.

Cove Point, supplied mostly by Transco, has experienced a more drastic variability pattern. Between March and early April, the facility dropped below 5% utilization following low points throughout January and February. From April to August, the terminal has dealt with a rollercoaster affect using 20% up to 110% of nameplate capacity, the analysts reported.

“Overtime we do expect utilization to rise to roughly 100% of nameplate capacity during periods where netbacks are strong, so down the road we do expect to see Cove Point utilization pick up somewhat, particularly this winter,” he said.

But delays to nine West Texas and South Texas downstream pipelines have been at the heart of the utilization problem, Hilfiker said.

According to Platts’ Mexican Pipeline Construction Tracker, the major delays include the Tula-Villa de Reyes pipeline and the Tuxpan pipeline. Tula has been delayed for 547 days and Tuxpan for 1,005 days since June, and both aren’t expected to come online until June 2019. Because of the delays, analysts expect U.S. exports to Mexico to remain constrained until 2019.

“While some of these timelines are getting pushed into 2019, there’s still uncertainty to the final in-service dates for these systems,” Hilfiker said. “A lot of these pipelines are facing issues with social unrest indigenous groups [that’s] taking a while to work out with SENER [so it’s] holding up other pipelines like Tula Villa de Reyes and that has direct impact to the West Texas corridor.”

If Mexico doesn’t meet these in-service date, he said we will see this downward pressure in West Texas basis remain at Waha, which the analyst noted has already slipped to $1 back from the Henry Hub.

Down the road the analysts said that Mexico’s LNG demand from the U.S. will diminish once these projects are completed, in turn, helping with flow constraints in the Permian where production for cheap gas is hitting record amounts due to oil drilling.

Mary Holcomb can be reached at mholcomb@hartenergy.com