Energy Aspects’ modelling sees .S. industrial gas baseload demand slowly climb toward 19.4 billion cubic feet per day (bcf/d) through the end of August – up from a low near 18.8 bcf/d in early May at the height of the health crisis.
“We expect part of the recovery to stem from refinery utilisation, which spiked back to 78% in the week ending 3 July, the highest level since March,” said Energy Aspects’ head of North America Natural Gas, Nina Fahy.
“According to our flow data, this is helping support Gulf Coast industrial demand, with Texas and Louisiana industrial gas use up by 6% month-on-month,” she explained. However, built into that 6% recovery is the impact of outsize heat on operations in West South Central.
Hence, the hopes for a swift U.S. economy cannot be pinned on growing manufacturing activity alone.
Industrial energy demand picks up slowly
As the U.S. and Mexican car manufacturing sector regains speed, natural gas exports from Texas to Mexico are also slowly returning to “more normal levels.” Cross-border flows into Mexico have trended above 6 bcf/d on some days this week, Energy Aspects figures show, as cooling demand rose in response to warmer weather.
The U.S. car maker Ford had to shut down some manufacturing plants in the United States, due to supply chain issues with Mexican engines sourced from Chihuahua State, where industrial output is still limited due to Covid-related lockdowns. “The capacity cap in Chihuahua could mean that the issue is not unique to Ford,” analysts said, warning these issues tend to greatly reduce electricity and gas demand from all energy-intensive industries.
GM, in contrast, is calling back hundreds of laid-off workers to its pickup factories. But some 200 workers at its Fort Bend, Indiana, assembly facility are out due to COVID-19, with workers also needed in Michigan and Texas.
Trade flows to Mexico still below pre-Covid levels
Volumes on the Sur de Texas–Tuxpan (STT) gas pipeline are, however, below pre-pandemic levels, averaging 0.85 bcf/d this month so far. STT deliveries into SISTRANGAS via Monte Grande are hovering around 20 mmcf/d this month to date versus 0.2 bcf/d on average in April.
“Despite some reports confirming that the last leg of the Wahalajara pipeline system – Villa de Reyes–Aguascalientes–Guadalajara (VRAG) – is now operational, flow data indicate the pipeline has not yet begun flowing gas,” Ms Fahy pointed out.
The first leg of the system – El Encino–La Laguna – has only delivered an average of 17 mmcf/d over 8-10 July to the Victoria thermal power plant. “Contracting issues between pipeline developer Fermaca and CFE seem to be behind the delay of a full Wahalajara start-up,” she said.
“As such, we continue to expect Manzanillo sendout to be gradually substituted with VRAG volumes from the first quarter of 2021.”
