Northern Mexico Hit With $2.7 billion Blackout due to Texas Freeze

MEXICO CITY (Reuters) — Factories across parts of northern Mexico on Tuesday reported $2.7 billion in losses from blackouts that extended to a second day on limited natural gas supplies from Texas, where a rare winter freeze has left millions of users without light or heat.

Rolling power cuts affected Chihuahua, Coahuila, Tamaulipas and Nuevo Leon, national electricity grid operator CENACE said, listing Mexican states that border Texas and have a heavy industrial presence, from big-box consumer manufacturing to auto and oil companies.

About 4.7 million users in northern Mexico lost power on Monday when cold weather froze pipelines and natural gas deliveries from Texas slowed. The freeze knocked out electricity for more than 2 million customers in Texas.

Power had been restored to about 80% of users by Tuesday, Mexican President Andres Manuel Lopez Obrador said. CENACE asked users to cut back on non-essential energy consumption due to the lack of fuel.

State electricity company CFE said about 1 million users in northern Mexico were still without power.

Mexico imports large volumes of natural gas from the United States amid a growing deficit in its own production. While Mexico's costs have been traditionally low in the North American gas market, they spiked in recent days due to weather-related issues.

Mexican President Andres Manuel Lopez Obrador
Mexican President Andres Manuel Lopez Obrador

Mexico does not have a natural gas storage infrastructure, which has left it vulnerable to supply cuts or weather emergencies like the Texas cold snap.

Obrador again decried fuel imports and said the country would seek self-sufficiency in natural gas, Natural Gas Intelligence reported. His administration has stopped new oil and gas rounds and has banned hydraulic fracturing, according to the NGI article.

CFE said on Monday it would shore up the system with hydroelectric and coal generation, in addition to seeking liquefied natural gas (LNG) to supplement slowed deliveries from Texas.

Later on Tuesday evening, 12 states farther south were to be included in the rotating blackouts, including major auto manufacturing centers Puebla and Guanajuato, the operator said.

Manufacturing lobby INDEX said 2,600 businesses were affected, and that hourly losses for 800 of its members had reached $200 million, including the costs of reactivating production after restoring power.

In total, the output losses over two days amounted to $2.7 billion, said INDEX Director Luis Hernandez.

"We have to deal with that crisis," Arturo Gutiérrez, chief executive of Nueva Leon-based bottling company Arca Continental, said about the outage on a call with analysts.

In Matamoros, opposite Brownsville, Texas, not a single company within the city's 90-member INDEX association was able to operate for more than two or three hours on Tuesday, said Rosalinda Torres, head of the group.

Chihuahua state was also hard hit, with 22 companies going without power for more than 24 hours, said Roman Rivas, the head of INDEX's Chihuahua chapter.

"Yesterday was practically a lost day for exports," he said.

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