Law and economics challenges of natural gas—the hard case of Mexico
Journal
The Journal of World Energy Law & Business
ISSN
1754-9957
1754-9965
Date Issued
2021
Author(s)
Marmolejo-Cervantes, Miguel
Garduño Rivera, Rafael
Type
text::journal::journal article
Abstract
<jats:title>Abstract</jats:title>
<jats:p>This article addresses the risks and uncertainties for Mexico derived from the excessive dependency on US natural gas. It will take as a reference Btu price fluctuation and the covenants contained on the based contract for sale and purchase of natural gas, particularly in the context of the behaviour displayed by market participants (including governments) during the recent winter storm energy crisis in Texas which consequently forced shortages in Mexico due to a lack of ‘available’ natural gas to produce power (electricity). The research question includes: Should Mexico exploit its vast natural gas resources although it might not be a sustainable or a cost-effective (economically–socially and environmentally) decision? (The curse of the TEX-MEX-NG). Or instead, would it be better to prepare (within the limits of its financial situation) to address the US natural gas price fluctuations, like price hedging? Or a combination of both?</jats:p>
<jats:p>This article addresses the risks and uncertainties for Mexico derived from the excessive dependency on US natural gas. It will take as a reference Btu price fluctuation and the covenants contained on the based contract for sale and purchase of natural gas, particularly in the context of the behaviour displayed by market participants (including governments) during the recent winter storm energy crisis in Texas which consequently forced shortages in Mexico due to a lack of ‘available’ natural gas to produce power (electricity). The research question includes: Should Mexico exploit its vast natural gas resources although it might not be a sustainable or a cost-effective (economically–socially and environmentally) decision? (The curse of the TEX-MEX-NG). Or instead, would it be better to prepare (within the limits of its financial situation) to address the US natural gas price fluctuations, like price hedging? Or a combination of both?</jats:p>