Mexican Nearshoring Opportunities Seen Spurring Energy Needs

The massive opportunities presented by nearshoring were all the rage last week at a power-packed conference in Monterrey, Nuevo León.

Industry Exchange LLC’s 8th Mexico Infrastructure Projects Forum kicked off with government officials and executives expounding on the topic. Nuevo León’s Secretary of Economy, Iván Rivas, said: “We will do everything to benefit American companies that move their companies from Asia to our state.” He highlighted the state’s booming geography, human capital, infrastructure, industrial parks and security.

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Rivas said that natural gas is the basis of the country’s electricity system. “But we have challenges in transmission and distribution,” with Nuevo León’s power generation doubling over the past 10 years to 34 TWh a year.

Rivas recently attended the World Economic Forum in Davos, Switzerland. There, he said, the topic on everyone’s lips was approaching. “Supply chains are changing and becoming more regional. What is sold in North America must be made here. This is proximity or friend-shoring…. And everyone held up Monterrey and Mexico as an example of that.”

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He highlighted Nuevo León’s relationship with Texas, just ahead of the event and the eighth largest economy on earth. Of the 140 projects being developed in Monterrey, 51 involve American companies. About 30% of the projects under development are in the intensive energy production segment.

Almost all of the natural gas used in Monterrey’s industry comes across the border from Texas.

‘We can’t let it go’

José María Lujambio, partner and director of the energy practice at Cacheaux, Cavazos & Newton, summed up the mood by saying that “nearshoring is the kind of opportunity that comes once in 100 years. It is about a reshaping of the global order.”

The president of the power group Asociación Mexicana de Energía (AME), Abraham Zamora, said, “We think rapprochement is a great opportunity in Mexico. We cannot let it pass.” AME members represent 33 GW of power capacity in Mexico, of which natural gas power plants account for 23 GW.

Zamora cited studies showing rapprochement could mean $36 billion/year in additional exports from Mexico.

“But we don’t invest enough in electricity in Mexico,” he said. Demand for electricity is growing by 2.8%/year until 2035, according to forecasts published by Mexico’s Ministry of Energy (Sener). “We must invest in generation, but also in transport and distribution. This is key to our energy security.”

Mexico needs $100 billion in new power plants in 2022-2036, or 56 GW of additional capacity over this period, according to Sener. Zamora said that “the political moment is a great opportunity with the upcoming change in government”. The private sector and government “have a lot more in common than many think,” he added.

Semiconductor, Electric Machine

The president of the sustainable development board for the northwestern state of Sonora, Francisco Acuña, said “the economic opportunity of the approach is enormous.” Of particular importance, he said, is the development of the semiconductor industry and electric vehicles.

He said that Sonora, in collaboration with the United States, is working on a plan that would expand logistics in the state to take advantage of a joint opportunity. He cited the recent visit of the Biden administration’s climate envoy, John Kerry, to Sonora.

“Nearshoring has a specific mix of logistics needs,” Acuña said.

The state is developing the 1 GW Puerto Peñasco solar power plant, along with other power plants that add up to 5 GW of new power capacity.

Sonora will also build new roads, expand port, airport and water infrastructure, and develop the entire supply chain for electric cars and semiconductors. This includes mining lithium and other critical minerals and manufacturing chips, batteries and electric cars. Sonora is also the site of planned liquefied natural gas export projects that will use natural gas shipped from the United States.

“We are also working to prepare the talent for the upcoming state and regional challenges,” he added.

Energy Infrastructure Crisis

Victor Cervantes of the government of the western state of Jalisco said energy supply and distribution remained a challenge for approaching opportunities. The capital of Jalisco, Guadalajara is a growing industrial center that receives natural gas from the United States via the Waha-to-Guadalajara, or Wahalajara, pipeline system.

“We have a strategy to generate investment systems with the private sector… We must make the most of the rapprochement,” said Cervantes. He also highlighted the state’s booming agricultural sector and the potential for biogas and renewable natural gas.

Carlos Garcia, director general of energy agency Agencia de Energía in southeastern Campeche, said: “We are creating the right conditions for rapprochement. Nobody can complain that we haven’t opened the doors.” He cited 30 years of experience in offshore oil and gas development and strong public-private relationships in the petroleum industry, including natural gas pipelines and industrial parks.

“All doors are open,” he said.

Natural gas driver

José Ramon Silva of the Comisión de Energía in northern Tamaulipas said it is “a priority of our state to develop hydrocarbons. The Burgos Basin is an extension of the Eagle Ford…. We have to develop the Burgos Basin and the natural gas deposit and that is also a priority for us.”

He said that “extensive natural gas networks will help us develop more efficient industrial parks.” He highlighted the development of desalination plants, the Port of Matamoros, the Sur de Texas-Tuxpan natural gas pipeline and New Fortress Energy Inc.’s plans. to export natural gas from the state.

“We are very open to investments and private partnerships.”

US Gas and Industrial Development

Raul Torres, director general of energy development in the central state of San Luis Potosí, said the merger of three natural gas systems in his state offered a ripe opportunity for industrial development.

“We are working with industrial parks to find where we can develop certain industries… We are a state of heavy industry focused on manufacturing.” He said the 700 MW Villa de Reyes natural gas power plant being developed by the Comisión Federal de Energía (CFE) could “transform the area.”