"We are expecting increased demand from the export sector and also increased industrial demand this year, and the export LNG and Mexican pipeline are basically the two drivers. Industrial demand is only expected to be up a couple hundred bcfs," said McGillian.
According to U.S. government data, gas pipeline shipments to Mexico reached 4.2 billion cubic feet per day already this year, up from 2.9 bcf/d in 2015.
New cross-border pipeline capacity of 7 billion cubic feet per day is expected to come on line by 2020 between Texas and Mexico, according to Citigroup. That would be on top of the current capacity of 6 to 7 billion cubic feet per day. Energy Transfer Partners, builder of the controversial Dakota Access pipeline in North Dakota, had approval from the Obama administration to build two pipelines to take gas from Texas to Mexico. President Donald Trump's pick to head the Energy Department, Rick Perry, had been on the board of Energy Transfer Partners.
"This is all new. Last year for LNG, we didn't export liquefied natural gas, and Mexico pipeline natural gas, you go back five years and it was very small," said McGillian.
The Energy Information Administration said Mexico is adding more electrical utility capacity and will be increasing new gas-fired capacity by 14.7 gigawatts by 2020. There will also be another 15.9 gigawatts of natural gas capacity added through 2029, as Mexico replaces coal and fuel oil fired capacity with natural gas.
As for LNG, the U.S. currently has two operating trains and Cheniere Energy is adding a third later this year and more will follow. McGillian said Cheniere shipments have gone around the world. According to government data, Chile, then Mexico took the largest amounts of LNG in January, followed by India, Argentina and China.
Another shift in the gas market could come just because prices have fallen. "We're reaching levels where it's uneconomic to run coal plants and that should pick up gas demand," said McGillian.
McGillian said natural gas begins to look attractive to plants fired by coal when gas falls under $3.
The U.S. is still a net importer of natural gas, mostly from Canada, but that should change as exports grow.