Mexico Strengthens its Role as a Gas Distribution Hub

Mexico is increasingly positioning itself as a strategic node in North American natural gas flows. Its geographic location between abundant US supply basins and Pacific and Atlantic shipping lanes, combined with growing midstream capacity and a push to expand storage and liquefaction facilities, gives Mexico genuine potential to evolve from a net importer and transit country into a regional LNG distribution hub. That potential, however, rests on the success of several marquee projects, a catch-up in national infrastructure, and policy choices that balance export ambition with domestic energy security and affordable prices.

Mexico sits at a crossroads. On the supply side, US shale growth has created surplus gas that increasingly must reach global markets; on the demand side, Asia and Latin America remain large LNG buyers. Mexico can play an intermediary role by liquefying US pipeline gas on its Pacific coast for shipment west, or by receiving LNG on either coast for regasification and distribution through its internal pipeline network. Projects slated to add liquefaction capacity on Mexico’s west coast — most notably the liquefaction expansion at Sempra/TotalEnergies’ Energia Costa Azul (ECA) terminal — are emblematic of this strategy, potentially linking US supply to Asia and the Pacific Basin while adding export capacity within North America. The US Energy Information Administration expects North American LNG export capacity to grow substantially in the 2024–2028 period, with Mexico contributing a portion of that increase if key projects move forward.

A handful of projects define Mexico’s hub ambitions, but each faces significant technical, commercial, and political hurdles. The Energia Costa Azul liquefaction addition (ECA) led by Sempra and partners would convert a regasification and storage site in Baja California into a two-way facility with liquefaction capability — an attractive geography for Pacific exports but one that requires regulatory clearances, US permits in some contractual structures, and timely financing and construction. Sempra has been seeking deadline extensions from US authorities as schedules shift, reflecting the tight timelines and interjurisdictional approvals needed.

Plans such as Mexico Pacific’s Saguaro LNG have run into environmental opposition and permitting delays, and analysts warn that global LNG market dynamics, including a potential near-term oversupply, increase commercial risk for new terminals. Civil society and environmental groups have highlighted social and ecological impacts on sensitive coastlines, adding political risk to the already high capital risk of LNG plants.

At the same time, Mexico’s internal supply picture matters. Ambitious upstream projects such as PEMEX’s Lakach deepwater gas development are intended to improve domestic gas volumes and reduce the country’s heavy reliance on US pipeline imports. However, Lakach has faced delays, rising costs, and questions about commercial viability. Securing steady, competitively priced feed gas, whether from domestic fields or US pipelines, is a prerequisite for using Mexican liquefaction capacity to serve export markets while maintaining affordable domestic supply.

Another structural bottleneck is storage and midstream capacity. Mexico has historically operated with limited commercial underground gas storage, leaving the country vulnerable to seasonal price spikes and supply disruptions. The government and pipeline operator CENAGAS are moving to rectify this with public consultations and plans to expand storage, but building a network of strategic storage caverns and additional pipeline loop-capacity will take time and capital. Without that buffer, large-scale liquefaction and export activity risks driving up domestic prices during peak months.

Impact on Mexico’s Industry and Regional Development
If Mexico can synchronize upstream production, midstream expansion, and export facilities without compromising domestic affordability, the economic payoff could be sizable. An operational liquefaction/exports corridor would create construction and long-term jobs, foster port and industrial cluster development on both coasts, and attract investment in gas-fired power generation and petrochemicals that depend on stable feedstock prices. Regions hosting terminals and pipelines would likely see growth in logistics, services, and secondary manufacturing. The Lakach project and other deepwater developments also carry the potential to catalyze onshore pipeline spur lines and processing hubs that generate local economic opportunities.

However, IEEFA and other analysts warn of trade-offs: aggressive LNG build-out tied to US feed gas could raise domestic gas and electricity prices for Mexican households and manufacturers, particularly if export markets bid prices upward during tight global conditions. There is a clear tension between exporting LNG for higher international margins and safeguarding affordable, reliable gas for domestic industry, power generation, and social needs. Policymakers must decide whether export-oriented infrastructure will be permitted or incentivized only if it includes safeguards for domestic supply and price stability.