Katrina, Rita Expected to Cause Gas, Fuel Shortages in Mexico

Two devastating hurricanes in the Gulf of Mexico in less than a month could cause natural gas and fuel supply shortages in Mexico as well as causing energy prices to spike, energy ministry sources told BNamericas, confirming local press reports.

Mexico's dependence on natural gas supplies from the US, from where the country imports about 20% of its gas consumption, means that natural disasters like hurricanes can affect supplies, send prices soaring and hurt overall economic development, Mexico's undersecretary for electricity, José Acevedo Monroy, told economists in Mexico City.

High natural gas prices also mean higher power generation costs for Mexican consumers as natural gas currently accounts for about 35% of the country's total power generation, up from 30% five years ago, he said.

"Today we have a gas price four times what we had 10 years ago and the possibility our commercial partners in North America, which export a large part of the gas we consume, could face an eventuality like we are seeing today means they could cut our gas supply," Acevedo said.

"Even when we opt for the cheapest option [natural gas], we don't opt for the least risky option," he added.

President Vicente Fox has announced a series of measures designed to wean Mexico off its gas and fuel dependence on the US, but those measures could take years to implement.

Meanwhile, a sharp increase in domestic energy prices and a shortage of imported oil and gas products are expected to follow in the wake of Katrina and now Rita, which will hit the US Gulf Coast sometime September 24-25, energy ministry sources said.

The government has not yet calculated the cost of the hurricane season but it is expected to mean a large financial loss for state oil company Pemex, offsetting the benefits of record high prices for crude exports this year, the sources said.


Since late August, when Hurricane Katrina crashed into the US Gulf of Mexico coast, Pemex has delayed or suspended temporarily a total eight million barrels (Mb) of crude oil shipments to its main client in the area, US oil company Chevron's Pascagoula refinery in Mississippi.

During the week of September 19 alone, Pemex delayed 3.5Mb of crude oil shipments to Pascagoula, a Pemex spokesperson told BNamericas.

Pascagoula, which normally produces 325,000 barrels a day (b/d) of fuel, will restart one of its crude oil processing lines by mid-October, but it is expected the refinery will not be back in full operation until mid-November, US press reported.

Pemex could have difficulty placing the crude oil shipments in alternative markets and has already slashed its prices to compete with other oil producers also trying to place their crude.

There is no information about other Pemex crude oil shipments being delayed to other US refineries, but such delays cannot be ruled out in the aftermath of Katrina and now Rita, the Pemex spokesperson said.


Pemex evacuated 200 workers from two platforms in the Gulf of Mexico - Ocean Whittington and Hakuryu V - on September 21 ahead of Rita's approach, the Pemex spokesperson said. On September 22, Pemex also shut down its Deer Park refinery facilities and evacuated workers, the spokesperson said.

The Deer Park refinery, a strategic association between Pemex and US Shell Oil Company in Houston, Texas, produces 180 000b of gasoline a day. At least three shipments from Deer Park to Mexico, representing 25,000b/d of fuel have already been delayed, but Pemex said it would guarantee domestic fuel supplies with purchases from alternative markets, the spokesperson said.

Pemex will evaluate the cost of repairing damage to its platforms and Deer Park facilities after Hurricane Rita passes, adding to the costs associated with delayed crude shipments, the spokesperson said.

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