Mexico is becoming increasingly dependent on imported gas from the US

A rise in gas generation has driven up Mexico’s gas imports

Since 2000, gas demand for electricity generation in Mexico has increased fivefold, rising from 1,017 million cubic feet per day (MMcfd) in 2000 to 5,387 MMcfd in 2024 – an increase of 4,370 MMcfd.

With domestic gas production declining, gas imports from the United States (for all uses) increased more than twenty-twofold over the same period, from 287.9 ​​million cubic feet per day (MMcfd) to 6,425 MMcfd in 2024, with the power and oil industries being the largest consumers of gas in the country. Of the total country’s domestically-produced gas, 15% reaches the market, and the remainder is used by PEMEX (Mexican state-owned petroleum corporation) in its own processes.

Approximately 74% of Mexico’s total gas demand is covered by imports, with the US as the supplier of almost all this fuel, putting Mexico in a high level of vulnerability to possible restrictions in gas supply for geopolitical, climatic or market reasons. 

Mexico buys 70% of the pipeline gas (dry gas) exported by the United States, and accounts for 31% of the total volume of US gas exports, including dry gas and liquefied natural gas (LNG). This makes Mexico the largest US gas buyer worldwide. In 2023, Mexico was the sixth-largest global importer of dry gas, making it one of the most dependent countries on foreign suppliers to meet its domestic energy demand.

Risks of dependence on imported gas

Importing fossil fuels to meet the needs of priority economic sectors can generate multiple risks and uncertainties. In the case of the electricity sector, apart from being exposed to gas supply risks, any sudden increase in the cost of gas imports is directly reflected in higher electricity generation costs – impacting user tariffs, or otherwise increasing public spending via subsidies. Likewise, exchange rate risk plays an important role for Mexico in its gas imports, because if the Mexican peso loses value against the dollar, this difference must be covered by the local buyer, since gas purchase transactions are made in dollars. 

Any technical, climatic or geopolitical event that causes a restriction in the gas supply in the country can cause unprecedented damage to the Mexican economy such as power outages, reduction in the production of energy-intensive companies, loss of competitiveness, industrial slowdown, and growth in inflation, among others. Current gas storage capacity is very limited; technical reserves only last three days without fuel supply. Therefore, it is vital that Mexico can move rapidly toward increasing the use of renewable energy for electricity generation.

Since 1994, gas imported by Mexico from the United States has had an annual average price of 3.90 dollars per thousand cubic feet ($/Mcf), but it has had a remarkable volatility in that period. High annual average prices have occurred on different occasions, the most notorious being in 2008 when it reached 8.25 $/Mcf, or in 2015 when the price reached 8.15 $/Mcf. On the other hand, the lowest historical annual price was in 2024, where Mexico paid the United States an average of 1.81 $/Mcf for the gas it bought – a quarter of the price in 2022. In recent months, the price of gas imported by Mexico has been rising, reaching 3.14 $/Mcf in December 2024 and 4.22 $/Mcf in January 2025.

Compared to Henry Hub prices, the most widely used benchmark for gas contracts in the US, Mexico’s imported gas has cost on average 3.1% lower over the last 25 years, but with notable variations such as in 2021 when the price Mexico paid for its gas imports was 25.4% higher than the reference price of the Henry Hub.

Gas generation has increased to meet rising electricity demand

Since 2009, more than half of the electricity generated in Mexico has come from fossil gas. As domestic gas production has declined and demand from the electricity sector has increased, imported gas has become more important to meet the country’s electricity demand. Gas went from having a 19.8% share of total electricity generation in 2000 to 58% in 2024. During this period, total electricity demand grew by 148.2 TWh, while the increase in gas generation was greater, reaching 163.5 TWh.

In 2024, 54% of the total electricity consumed in Mexico was generated with gas imported from the United States, providing 189.6 TWh of electricity to the national energy system. Total gas demand for electricity generation was 5,386 million cubic feet per day (MMcfd), of which 5,039 MMcfd (94%) was imported from the US at a cost of $3.3 billion dollars.

By 2024, renewable generation reached a 21.6% share, with solar and wind energy accounting for 11.8%. Clean generation, which includes nuclear energy, supplied 25.1% of electricity demand. According to Mexico’s Electricity Industry Law, clean energy sources include solar, wind, nuclear, hydroelectric, geothermal, hydrogen, and efficient cogeneration.