Most investors today assume North American natural gas prices are at the mercy of supply. With a turn-around only expected to come once surging production from shale plays starts to moderate.

But events last week suggest that growing demand for U.S. natgas may soon help put a floor under prices.

That demand is coming from a somewhat unexpected place: Mexico. With another pipeline project just approved to export Texas natgas south of the border.

The U.S. Federal Energy Regulatory Commission (FERC) issued a presidential permit to a project run by Energy Transfer Partners. Giving the company the green light to build a 37 kilometre pipeline linking Hidalgo County in Texas and the city of Reynosa in Tamaulipas state, Mexico.

The export pipeline is planned to connect with existing infrastructure controlled by Mexican state firm Pemex. With gas being used primarily to feed gas-fired power plants and industrial customers in northern Mexico.

This project isn't a massive one. With the planned pipeline capacity being only 140 million cubic feet per day. But it represents yet another pipeline export project approved without much contention or controversy--suggesting that regulators will likely allow the growing trend toward Mexican natgas shipments to continue.

This has the potential to move market prices. So far, some 2.24 billion cubic feet per day of export project capacity has been approved by FERC. Which is starting to amount to a significant chunk of supply taken out of the U.S.

Mexico plans to encourage the development of more natural gas-fueled facilities in the north of the country. Relying primarily on U.S. supply--with total demand potentially reaching 7 billion cubic feet per day.

At that point we could be seeing nearly 10% of U.S. natgas output heading south. An amount that would take a lot of slack out of prices, even if production doesn't moderate.

These pipeline developments won't happen overnight. But they won't take long either. We could see the first projects coming online later this year.

Keep an eye on this dark horse. It's going to surprise a lot of people.

Here's to things going south,

By Dave Forest