Natural gas might be about to get cheaper in Mexico. According to Natural Gas Intelligence (NGI), the U.S. government has given its approval for Energy Transfer Partners's subsidiary, Houston Pipe Line Co. (HPL), to ship shale gas between Texas and Mexico through a pipeline. Less expensive gas will benefit manufacturing in Mexico.
According to Reuters, the pipeline will be 23 miles long and 24 inches in diameter. The pipe is currently planned for installation underneath the Rio Grande River, and it will cross the international border there before continuing South into a pipeline owned by Pemex, a Mexican gas and oil company.
The facility that will export the gas into Mexico will be capable of processing 140 million cubic feet per day of gas, with an operating capacity of 1,300 pounds per square inch, according to NGI.
HPL expects to ship not only its own natural gas to Mexico, but product from other pipelines as well. Because of the North American Free Trade Agreement, the gas will be shipped to Mexico with no tariff.
According to the order, the border crossing "...is needed to export gas to meet the expanding fuel demand for power generation and industrial activity in Mexico, and authorization for the construction of the facilities therefore will promote national economic policy by reducing barriers to foreign trade and stimulating the flow of goods and services between the United States and Mexico..."
The Mexican advantage
With the benefit of NAFTA allowing for tariff-free exchanges of gas, along with many other innovations that are improving Mexican infrastructure and energy supplies, now is a great time to consider expanding to Mexico and opening a nearshoring facility where companies can take advantage of Mexico's inexpensive manufacturing climate.
One such company, Classic Industries, Inc. is doing exactly that, according to the Pittsburgh Business Times. They have opened a third party logistics facility in Mexico, right next to where HPL is planning to put its pipeline - next to the Rio Grande and across from Classic's existing plant in El Paso, Texas.
Classic manufactures client-designed medical device components and regulated health care products through injection molding.
The plant is 125,000 square feet, and it will be used to assemble custom products. It will also be capable of managing inventory, kitting and packaging products for delivery to the company's clients.
The company has also expanded to Puerto Rico, another location that is becoming very good for offshoring.