Running on empty
On 7 October, the official in charge of Mexico’s natural gas transport network told reporters at President Sheinbaum’s morning press conference that the country had faced a ‘critical situation’ due to a cut of 20 per cent of its natural gas imports from the United States.
Analysts and media outlets leapt on the remark, and within hours a brief comment and the lack of a broader explanation had snowballed into a wave of (often poorly understood) media coverage. For a few hours some wrote that Washington was showing Mexico it could bring the country to its knees within days simply by cutting off energy supply. As the saying goes, ‘el miedo no anda en burro’.
But this fear was unfounded. The ‘critical situation’ described by Cuitláhuac García Jiménez, director-general of the National Natural Gas Control Centre (Cenagas) and a former governor of Veracruz, was a technical problem on a Texas pipeline. According to a company filing reported by Bloomberg, Tennessee Gas Pipeline, a Kinder Morgan subsidiary, identified problems on its system on 5 October during scheduled maintenance and had to isolate sections of pipe, including the Río Bravo and Cenagas delivery meters on the border. It declared force majeure the following day, and Cenagas was warned that flows to Mexico could fall by up to 20 per cent. Repairs were completed and shipments restored on 8 October. The same day García said there was no gas crisis, adding that Pemex was producing more gas domestically.
The episode highlighted a vulnerability, but the risks of relying on US gas are the inextricable bi-product of enormous economic benefits Mexico derives from that relationship, Mexico enjoys access to some of the cheapest and most abundant natural gas in the world, thanks to its proximity to Texas and the extensive cross-border pipeline network built over recent decades. This is a major competitive advantage that most countries would envy. Cheap US gas helps keep Mexican electricity prices down, underpins the competitiveness of its manufacturing sector and is critical to CFE’s financial viability at current household electricity tariffs. Without access to US gas at competitive prices, Mexico would face considerably higher electricity costs, with consequences for industry, households and public finances.
The relationship also works for Washington, and above all Texas. As Mexico faces pressure to reduce its substantial bilateral trade surplus with the United States during the USMCA negotiations, energy purchases offer one way to narrow the imbalance. Energy is one of the few major sectors in which the United States consistently runs a bilateral trade surplus with Mexico, and Washington has pressed Mexico to increase purchases of US natural gas and other energy products. Without these imports, the overall US trade deficit with Mexico would be even larger. The commercial relationship therefore serves important economic and political interests on both sides of the border.
Further, the risk of Washington deliberately cutting off natural gas supplies to Mexico is by any reasonable analysis extremely low. A substantial share of the gas produced in Texas, particularly in the Permian Basin, is associated gas, a by-product of oil production. It is produced because companies are drilling for oil, rather than necessarily because they want to produce more gas. Indeed, the Permian accounted for almost a quarter of all US marketed natural gas production in 2025, and much of its growth comes from associated gas.
The gas thus needs somewhere to go. Mexico is the obvious and perhaps only market, connected directly to Texas through an extensive pipeline network. While US producers can also sell gas domestically or through LNG export terminals, those alternatives are constrained by available infrastructure capacity. If exports to Mexico were suddenly blocked, some producers could find themselves having to sell gas at deeply discounted prices, curtail oil production or, where regulations permit, flare unwanted gas at additional cost.
This makes natural gas an unlikely and poorly chosen weapon in any trade confrontation with Mexico. The Trump administration has plenty of other levers it can pull to pressure its southern neighbour, from tariffs and border restrictions to security cooperation. But cutting off gas would inflict considerable damage on US energy companies, pipeline operators and their investors, particularly in Texas, a state central to America’s energy industry and Republican politics. It would also undermine Washington’s efforts to expand US energy exports and reduce its bilateral trade deficit with Mexico. In other words, a deliberate cutoff would hurt both countries, with relatively little obvious benefit to Washington.
The more credible (and real) risks from dependence on US gas are thus technical failures, extreme weather events and inadequate contingency planning, rather than the deliberate weaponisation of gas exports. The 2021 winter storm in the southern United States showed what a supply shock can do. Damage to US gas infrastructure triggered blackouts across several Mexican states, left CFE carrying higher energy costs for more than a year and led to international legal disputes over supply contracts.
This makes sufficient storage to protect against such risks critical, which is a Mexico and not a Trump problem. At the press conference García admitted that Mexico would have enough gas for no more than three days if US imports were cut off entirely. He credited coordination between Pemex, CFE, Cenagas and other agencies with keeping supply flowing during the shortfall. The country has no relevant strategic natural gas storage, despite a 2018 SENER policy that required Cenagas to hold an inventory of 45 billion cubic feet, about five days of national consumption, by 2026.
Some worry about the longer-term US gas outlook and the impact on Mexico. In a Milenio column on 12 October, energy analyst Ramsés Pech set out five hypothetical scenarios for US gas supply to 2050, framed explicitly as analytical exercises rather than forecasts. Their common thread is that Mexico’s pipeline imports could face increasing competition from growing US domestic demand and LNG exports. In one scenario, US output stays flat while LNG exports grow (as the EIA projects) and Mexico absorbs a quarter of that growth; flows to Mexico would then fall to about 2.6 bcf/d by 2050, more than 60 per cent below today’s level. Houston, we might have a problem.
Even in his more benign scenarios, Mexico’s own rising demand would push its import needs to about 8 bcf/d. Most of Mexico’s domestically produced gas is associated with oil production and cannot be ramped up independently, so, he argues, the country would struggle to absorb a major shock. These scenarios illustrate potential risks rather than an inevitable outcome, particularly given the considerable capacity of the US gas industry to respond to market demand. Indeed, the EIA expects US gas exports, both through pipelines and as LNG, to continue growing over the coming years, supported by expanding production and export infrastructure.
Going back to storage, even the three-day buffer figure is disputed. Eduardo Prud’homme, a former head of technical management at Cenagas and partner at the consultancy Gadex, called it wrong, arguing that the volume needed to cover three days of national demand far exceeds what the Cenagas network carries. Pech goes further, putting the buffer at under 48 hours. Other analysts note that the three days refer to linepack, the gas held inside the pipelines, rather than to any storage facility. That gas cannot simply be drawn down during a shortage. Pipelines need to maintain a minimum pressure to operate, and other operational constraints mean the country could not necessarily get from Monday to Thursday without fresh gas entering the system.
At the same press conference Sheinbaum said her government aims to reduce dependence on imports by expanding solar, wind and geothermal power, recovering gas currently flared into the atmosphere, improving energy efficiency and exploring domestic alternatives. These include unconventional gas using fracking, although the government has already ruled out using the method in some areas. As reported in previous editions, the rationale for the new committee studying fracking is precisely to reduce dependence on US gas.
But as often when the Mexican government is directing investment, especially in energy, the question becomes whether this will be done efficiently, and returns on capital deployed meet minimum thresholds. The example of the Olmeca refinery, which ended up costing over $20bn versus the $8bn budgeted, and was also justified on the basis of energy security, is not encouraging. And amid all these energy investment announcements, lacking so far from the President and Energy Minister are more details on the much-needed increased investment in gas storage, and what role the private sector can play in this.
Writing in El Financiero, columnist Eduardo Guerrero Gutiérrez proposes a North American energy security agreement covering emergency supply protocols, reserve coordination and protection of critical infrastructure. In his view, sovereignty means being able to withstand a supply disruption, not producing every cubic foot at home. Indeed, the commercial incentives on both sides of the border strongly favour continued and indeed increased trade, plus energy security protocols for each country. Under this line of thought, the priority should therefore be to complement this highly beneficial US-Mexico energy relationship with adequate storage, diversified supply routes and better emergency planning. The objective should be to make a mutually beneficial energy relationship more secure, rather than to reduce it for its own sake, which would be to the detriment of all.
Energy on the table
Continuing the same subject, President Donald Trump has pressed Mexico to sign more energy deals with US companies as trade negotiations stall, the Financial Times reported on 9 October. Citing three people familiar with the conversation, the FT said Trump told Claudia Sheinbaum during a call in mid-September that he wanted more partnerships between Mexican and US energy companies. One source said Trump initially raised the possibility of Mexican energy assets being sold to US investors. The leaders also reportedly discussed an agreement similar to one signed by South Korea in 2025, under which Seoul committed to purchasing US$100 billion in American energy products and investing billions more in the United States.
A US official said Trump specifically sought increased Mexican purchases of US natural gas to help narrow Mexico’s trade surplus with the United States. Energy is already the sector in which Washington runs its largest bilateral surplus, approximately US$25 billion last year, compared with an overall US goods deficit approaching US$200 billion. Carlos Pascual, a former US ambassador to Mexico and now at S&P Global, noted that Mexican access to cheap US pipeline gas remains a major competitive advantage.
The request is politically sensitive given Sheinbaum’s commitment to state control of the energy sector. A White House official said cooperation could advance within the limits of US law and Mexico’s Constitution. The Mexican government declined to comment.
The energy dispute has reportedly complicated trade negotiations. A formal round scheduled for September was postponed and then cancelled, with two FT sources attributing the delay partly to Trump’s new demands. US officials offered a different explanation, citing scheduling conflicts, and described the discussions as positive. No new date has been announced.
Meanwhile, Trump suggested at a 10 October rally in Tennessee that Washington could negotiate a separate trade agreement with Mexico, potentially excluding Canada, although he provided no details. Sheinbaum responded on 12 October that USMCA negotiations were progressing and that Trump’s remarks did not signal the treaty’s end. The USTR’s public consultation ahead of the review remains open until 12 January 2027.
Open for (mixed) business
On 1 October CFE held its first investor meeting, the Primer Encuentro con Inversionistas CFE 2026, at the National Museum of Energy and Technology (MUNET). Around 250 Mexican and international investors attended, including Afores (pension fund managers), banks and energy companies. Energy Secretary Luz Elena González set out the government’s pitch: a financially stronger CFE can be a reliable long-term partner for private capital, through calls for private and mixed-ownership projects that she said would follow clear rules and open, competitive allocation.
CFE’s finance director, Eugenio Amador Quijano, presented progress on the 2025–2030 plan to strengthen and expand the national electricity system, which envisages investment of about US$37.5 billion. The centrepiece is the mixed development scheme (Esquemas de Desarrollo Mixto). Its first call drew bids for more than 38 GW, five times the 7.5 GW target, and awarded 8,025 MW across 38 projects representing about US$10.6 billion of investment. On the strength of that response, a second call includes storage projects for the first time, and 40 projects have registered so far.
The financing to match is taking shape. Jorge Mendoza, director-general of the state development bank Banobras, told Bloomberg Línea on 12 October that an ‘umbrella’ vehicle to fund renewable generation projects, with a reference size of up to 80 billion pesos, should launch before the end of 2026. ‘We should be ready this year; I hope within weeks,’ he said. Its structure is complete and the finance ministry has appointed I Squared Capital to manage it.
The vehicle will be run privately, with funding from other market participants. Developers awarded projects by CFE will be able to use it, but they can also go to commercial banks or to Banobras directly. Such vehicles were made possible by Sheinbaum’s Infrastructure Law, in force since April, which created special-purpose investment vehicles. Finance Undersecretary María del Carmen Bonilla said in May that the umbrella structure responded to investors who had spent years asking the finance ministry for ways to invest in Mexico at scale. On 8 October she told the Chamber of Deputies’ finance committee that foreign funds were interested in the projects awarded through CFE’s tenders.
Closing the event, Finance Secretary Edgar Amador Zamora said the government’s 2026–2030 infrastructure investment plan (Plan de Inversión en Infraestructura para el Desarrollo con Bienestar) envisages about 5.6 trillion pesos across eight strategic sectors, with more than half going to energy.
The government filled in the wider picture on 7 October, when González presented an energy sector update at Sheinbaum’s morning press conference. The presentation puts total investment for 2025–2030 at 1.17 trillion pesos. Electricity accounts for 1.03 trillion: 794 billion pesos for generation, 161 billion for transmission and 72 billion for distribution. The remaining 141 billion goes to gas pipelines, split between CFE (54 billion) and Cenagas (87 billion). The generation breakdown is telling: only 142 billion pesos is to come from CFE on its own, against 453 billion through mixed schemes and 199 billion from private developers. Even so, the government expects the state’s share of generation to rise from 57 per cent to 61 per cent by 2030.
On capacity, all six combined-cycle plants inaugurated so far (3,113 MW) and the four due to start operating (3,580 MW) were begun under the previous administration. The current one has tendered five plants totalling 2,719 MW, four of them under construction, and has modernised eight hydroelectric plants. Two further phases of the Puerto Peñasco solar complex in Sonora add 580 MW. On renewables, 55 projects totalling about 10,900 MW are under way, 42 solar and 13 wind, with CFE participating in around 70 per cent of the portfolio. A further 9,050 MW, mostly solar, wind and cogeneration, is still to be allocated. The goal is to raise renewables from 24 per cent of generation to 38 per cent by 2030. Sheinbaum said financing would come from CFE’s own resources and from mechanisms that bring in private capital without transferring ownership of plants that remain under CFE control.
The pitch is a deliberate change of tone after six years in which new private investment in the sector largely dried up. More than four-fifths of planned generation spending is to flow through mixed or private schemes rather than CFE alone, yet the state still expects to increase its share of output. The plan also bears on the vulnerability set out in our lead item. Much of the new public capacity is gas-fired combined-cycle generation, which will add to demand for imported US gas even as renewables expand. And while CFE’s second call brings in electricity storage for the first time, the 141 billion pesos for gas is earmarked for expanding, rehabilitating and modernising pipelines. None of it goes to gas storage.
Chatter Box
The phantom crude cargo
Briefly, Mexico appeared to have quietly started importing US crude. On 9 October El Financiero reported that US Census Bureau data showed 597,027 barrels of crude, worth US $69.67 million, shipped to Mexico in June: the first such export since 2018. Pemex told the paper it had imported no crude in 2026 and had no record of a valid permit. SENER did not comment; El Financiero found it had issued no crude import permits.
Within hours, the Census Bureau told Bloomberg Línea it had changed the June cargo’s destination to Singapore and reclassified a 980-barrel May entry as auto parts. US crude exports to Mexico this year stand at zero.
The episode mirrors 2019, when the Census Bureau corrected data showing some 541,000 barrels shipped to Mexico in July–August after the López Obrador government denied them.
That a statistical slip makes headlines says more about the politics of crude imports than the trade. As energy specialist Fluvio Ruiz Alarcón told El Financiero, blending crudes to suit a refinery’s design is standard practice: of the roughly 340,000 b/d processed at Pemex’s Deer Park refinery in Texas, only about 70,000 b/d is Maya. In October 2018 PMI, Pemex’s trading arm, announced cargoes totalling 1.4 million barrels of US Bakken light crude to improve refinery feedstock. With Pemex’s crude and condensate output at 1.64 million b/d in August, and refineries designed for lighter grades than it produces, whether Mexico will need imported crude remains an open question. This cargo was not the answer.
Mixed contracts attract smaller players
Pemex’s mixed contracts are attracting private capital, but not from the companies that could move the needle on output. Expansión reported on 8 October that nine of the 21 contracts Pemex plans for this administration have been signed, none with Shell, BP, ExxonMobil or Chevron. The first awards, in February, went instead to 5M del Golfo, which holds three onshore contracts, and to Petrolera Miahuapán, Geolis and Carlos Slim’s GSM Bronco.
Óscar Roldán Flores, 5M’s director-general, told an industry congress the company looked first at the payment mechanism, given Pemex’s lingering payment crisis, and found a solid one in a trust held at private rather than state banks. Asset quality came next and contract terms last. A multinational oil company, speaking to Expansión on condition of anonymity, named the main deterrent: cost recovery is capped at 30 per cent, negotiable up to 40 per cent.
Roldán said the model works for mature fields that already generate cash, and that applying it to offshore greenfield projects was a mistake. The record supports him. In July Pemex cancelled four offshore mixed-contract tenders, citing force majeure. Shell, Eni, BP, Woodside and SLB had shown interest, according to Mexico Business News, but raised concerns over fiscal terms, operational control and lender protections. Pemex is counting on the 21 contracts to deliver 450,000 b/d at peak, around 2033, but by mid-year none had added a barrel, against a target of 90,000 b/d this year.
Mixed contracts can help slow decline at mature onshore fields. The deepwater and complex reservoirs that could transform output will still need terms that price in the risk.
LP gas prices spike
Domestic LP gas, the fuel most Mexican households cook with, rose 3.14 per cent month on month in September, its biggest September increase since 2021, according to INEGI. Energy prices as a whole rose 0.55 per cent, reversing a 0.35 per cent fall in August despite the petrol price ceiling, and helped lift annual headline inflation to 3.45 per cent from 3.26 per cent.
Producer prices tell the same story more loudly. The INPP rose 1.37 per cent in September after five consecutive monthly declines, taking annual producer inflation to 4.05 per cent from 2.88 per cent.
Crude oil was the main driver, up 34 per cent on the month and accounting for nearly half the overall rise, while producer prices for petrol and diesel rose 7.5 and 11.5 per cent respectively.
LP gas has been subject to weekly maximum prices since 2021, now published by the CNE for 145 regions, but a ceiling caps increases rather than freezing prices. Grupo Financiero Base kept its year-end inflation forecast at 3.9 per cent but flagged upside risks from fuel and food prices, warning that LP gas demand could rise as a substitute if natural gas supply tightened. That warning was linked to the 7 October Cenagas episode covered in our lead item, which looked far more alarming that morning than it did a day later. The more durable risk, which Base also flagged, is renewed escalation in the Middle East pushing crude, and with it petrol and diesel, higher still.
Armed attack at Minatitlán refinery
Two Pemex security workers have died after a gunman opened fire at the north gate of the Lázaro Cárdenas refinery in Minatitlán, Veracruz, at around 10pm on 10 October. Eduardo Espinosa Gómez, 30, who had just started his shift, died at the scene. Óscar Ochoa was seriously wounded and died at Pemex’s regional hospital the following day. According to initial forensic findings, the attacker approached on foot and fired more than nine times before fleeing. Federal and Veracruz state prosecutors are investigating, but no arrests have been made. Imagen del Golfo reports that early inquiries suggest Espinosa was the intended target and that Ochoa may have been caught in the attack; neither line has been officially confirmed. Pemex, whose initial statement referred to two injured workers, said it was cooperating with the authorities, while Section 10 of the oil workers’ union has called for the case to be swiftly resolved. The Navy has reinforced security at the site.
Until prosecutors establish a motive, there is no basis for linking the attack to the refinery’s operations or to fuel theft. But a shooting at the gate of one of the refineries the government is relying on to cut fuel imports is a reminder that security at strategic installations remains a live concern, for Pemex’s workforce as much as for its assets.
Secretary González hits back
Energy Secretary Luz Elena González has rejected claims in an 11 October El Universal opinion column by Claudio Ochoa Huerta that she helped businessman Jack Landsmanas’s Corporativo Kosmos win leasing and food contracts at Pemex. Ochoa Huerta describes González as a friend of Sheinbaum for more than 25 years and the de facto head of Pemex, but cites no contracts. Instead he points to her past ties to the group: according to her declarations of interest, she was paid about 3.4 million pesos in 2014–2016 for services to two Kosmos companies, La Cosmopolitana and Productos Serel. The column describes Kosmos as a major government food supplier. It says the group’s companies won about 28 billion pesos in federal and state contracts under López Obrador and around 4 billion so far under Sheinbaum, and that their role in Venezuela’s CLAP food programme under Nicolás Maduro drew US attention. In a letter to El Universal the same day, González called the column baseless. Citing Pemex, she said neither La Cosmopolitana nor Productos Serel has held a contract with the oil company, or been on its supplier register, since 2024. The letter does not address Kosmos itself or her earlier work for the two firms.