For natural gas producers in the Bakken Formation looking for a market to soak up shale gas, the United States and Canada already are relatively awash. But look to the south. Even though Mexico has rich natural gas resources, its domestic natural gas consumption is rising faster than production. Heavy industry is expanding in the country's northern states, and Mexico is intent on switching its largely oil-based power generation to natural gas generation, enticed chiefly by low gas prices in the United States fueled by tremendous growth in unconventional shale plays like the Bakken, Barnett, Fayetteville and Haynesville Shales.

Mexico is more than a hungry market. The power demand and economic growth in Mexico portends a North American industrial juggernaut, fueled by natural gas delivered by pipelines across the three largest countries on the continent.

While Mexico's economic growth slowed in the first quarter of 2013, the World Bank expects that the country's gross domestic product will grow 3.5% this year and increase in 2014. Even more, Mexico's three main political parties have agreed to promote more than 100 reforms—aimed at increasing competition in telecommunications, media, banking and energy—and all designed to achieve a 5.0% GDP growth.

Mexico has the fourth-largest shale-gas reserve in the world. But financially and technologically constrained Petróleos Mexicanos (Pemex, Mexico's state-owned oil and gas producer) has found it difficult to match natural gas production with demand. One obstacle is a constitutional prohibition on foreign investment in Mexico's domestic petroleum reserves. Reform-minded president, Enrique Peña Nieto, wants to move legislation as early as August to open up the oil-and-gas industry to private investment for exploration and production from shale formations, as well as in deep water offshore. Shallow-water and onshore oil would remain in Pemex's realm.

Pemex's natural gas production difficulties—and the fact that the company would rather export gas to the more lucrative Central American market and import less-expensive U.S. gas—have led Mexico's gas imports to skyrocket over the last few years. The country imported 2.1 billion cubic feet per day (bcfd) in 2012, up 21% from 2011. Of that, U.S. pipelines accounted for 80%. (The rest were liquefied natural gas deliveries from other countries.) In 2012, the United States saw its exports to Mexico jump to 1.7 bcfd, 24% over 2011. In the first four months of 2013, U.S. exports to Mexico were 29% greater the same period in 2012.

Those numbers promise to rise. The Comisión Federal de Electricidad (CFE, the state-owned electric utility) projects a need for 28 gigawatts of new natural gas-fired capacity between 2012 and 2027, requiring an additional 5.1 bcfd. Also, new and existing industrial facilities are looking for natural gas—fuel oil is currently three times the current gas price.

Pemex estimates natural gas imports from the United States will more than triple by the end of 2015 as new pipeline projects (which are open to private-sector investment) come online. Several projects for new and expanded pipeline capacity will be completed by the end of 2014, potentially adding 3.5 bcfd of additional U.S. export capacity—twice the existing capacity.

Last November, for example, CFE awarded Sempra International's Mexican business unit two contracts to build a 500-mile, $1 billion pipeline network connecting the Northwestern states of Sonora and Sinaloa. The network will join the U.S. interstate pipeline system via the Kinder Morgan El Paso Southwest system, in Sasabe, Arizona. CFE has contracted for 25 years of firm capacity.

CFE also awarded a contract to TransCanada Corporation's Mexican subsidiary to build the El Encino-to-Topolobampo Pipeline. TransCanada expects to invest approximately $1 billion in the project, which is supported as well by a 25-year firm service contract.

Pipelines and Power Lines

The commerce is tiny, but Mexico is a net exporter of electricity to the United States, with small exports via California, New Mexico and Texas, where power lines cross the border. Most exported power goes from northern Baja to San Diego, California; Mexico imports slightly less from Texas. Sempra is building a 230-kilovolt line from California specifically to bring in power from a Mexican wind farm.

But, according to the Energy Information Administration (EIA), signs are that Mexico will boost power imports. The expanded import of natural gas, and the growth in electricity demand by new manufacturing, most likely will fuel more independent power production in Mexico but also increase the country's electricity imports and need for transmission.

In the end, natural gas for Mexico will mean expenditures in heavy equipment, steel, information technology and so forth on both sides of the border. In the United States, according to IHS, unconventional gas production will support 3 million direct and indirect U.S. jobs by 2020. EIA projects that natural gas consumption in the U.S. industrial sector will grow by about 15% between 2012 and 2035. Already, many chemical and similar factories are relocating to the United States after having left it years ago due to high gas prices.

Success for shale-gas operations—as well as the industrial rejuvenation of the world's number-one economy (the United States) and the number-eleven economy (Canada)—may depend on the economic growth of their southern neighbor (the number-fourteen economy) and its increased demand for natural gas. Success breeds success.