The incoming administration of President-elect Donald Trump is confronting two major policy challenges with Mexico in the form of tighter immigration controls and potential NAFTA renegotiation.
However, there's something already flowing across the border that is proving its weight in gold to both countries.
Vast amounts of U.S. natural gas, a product of the shale revolution, is being shipped in increasing capacity to feed Mexico's burgeoning nat gas demand. In the wake of its 2013 energy reforms, the country has been gradually reshaping its oil and gas sector, with much of its energy needs being met by its neighbor to the north.
Last year, Mexico's Energy Ministry set a goal to triple its gas imports from the U.S. over five years, as part of a plan to bolster its own energy infrastructure. Among developed nations, U.S. nat gas prices are by far the least expensive. In a recent report, the International Energy Agency said the globalizing of the natural gas market will eventually make U.S. prices "a global reference point."
Citing Mexico's growing energy needs, the Energy Information Administration said this week that U.S. pipeline capacity to ship nat gas exports south of the border stood at 7.3 billion cubic feet per day (bcf/d) — which may double within the next few years.
The U.S. shipped more than 1.7 trillion cubic feet of nat gas in 2015, most of that via pipeline, with Mexico absorbing around 1 trillion of that amount, EIA data show — a sum that's nearly tripled since 2010.
"The expansion of the U.S. cross-border pipeline network into Mexico has been driven primarily by strong growth in Mexico's natural gas demand in the power sector, declining domestic production and the lower prices of U.S. pipeline gas compared with more expensive liquefied natural gas (LNG) imports," the EIA wrote in a blog post on its website.
Just from Texas's Eagle Ford shale formation alone, natural gas shipments to Mexico are projected to hit 3.4 bc/f a day by 2020, according to a 2015 report by the Texas Railroad Commission. It's part of the world's largest economy's rapid transformation into an energy superpower — a path that got a big jolt earlier this year when the U.S. began shipping LNG abroad for the first time ever.