Net Midstream announced plans for a 42-inch, 124 mile pipeline from Nueces County to Starr County in South Texas. The pipeline is backed by a 2.1 Bcfd transportation contract with MGI Supply ltd (PEMEX Subsidiary). If the pipeline runs at capacity, it will more than double current exports to Mexico.

The natural gas will be transported from the Agua Dulce hub in Nueces County to a point near Rio Grande City in Starr County.

In the past two years, US natural gas flows into Mexico have increased to approximately 2 Bcf/d. That's up from less than 1 Bcf/d at the beginning of 2010. Demand for natural gas in Mexico is rising as natural gas production is falling. Compare US natural gas prices to LNG prices and you begin to see why Mexico is after US natural gas. It's cheap! An $8 billion pipeline expansion of Mexican infrastructure is already planned. More than $3 billion will be spent expanding pipelines in Northern Mexico where the Net Mexico Pipeline will connect.

“NET Mexico Pipeline will be an important source of supply to meet Mexico’s growing demand for natural gas” said Joe Gutierrez, Co-President of NET. “Welook forward to this exciting new partnership with MGI and PEMEX Gas. NET Mexico is a natural next step in our pipeline system, as we connect abundant gas supply from the Eagle Ford Shale to expanding power generation and industrial markets in Mexico."

Net Midstream already operates a 30-inch, 150 mile pipeline that originates at the Brasada Processing Plant (operated by Western Gas) in La Salle County Texas. That is one Eagle Ford source and I bet we'll see others as gas production grows. Natural gas prices in Mexico are more favorable (higher), so producers will enjoy a transportation route that avoids Henry Hub.

Net Midstream also operates a pipeline that delivers gas to a 200 MW power plant in La Salle County and a 30-mile pipeline that serves the City of Corpus Christi.

Read the full press release here.