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Sierrita Pipeline Comes Online, Adding to U.S.-to-Mexico NatGas Export Options

Options for natural gas supply heading south of the border just got a lot more plentiful as Kinder Morgan Inc.'s (KM) Sierrita Pipeline, which entered service Friday, became the second U.S.-to-Mexico natural gas pipeline to go into service within a week.

The Sierrita Pipeline project (formerly known as the Sasabe Pipeline project) was designed to deliver natural gas to southwestern markets in the United States and high-growth power generation markets in northern Mexico. The 61-mile, 36-inch diameter lateral from El Paso Natural Gas's (EPNG) system in Arizona delivers to a point south of Tucson near the international border at Sasabe, AZ. El Paso is owned by Kinder Morgan.

The Sierrita Pipeline will interconnect via a new international border crossing with a new 36-inch diameter natural gas pipeline in Mexico. Mexico’s Comision Federal de Electricidad (CFE) awarded two contracts to Sempra International’s Mexican business unit to construct, own and operate an approximately 500-mile, $1 billion pipeline network connecting the northwestern states of Sonora and Sinaloa. The Sierrita Pipeline will interconnect with this pipeline network.

The approximately $204 million pipeline has the capacity to deliver 200 MMcf/d of gas (see Daily GPI, April 16, 2013). Sierrita Pipeline LLC informed FERC on Friday that the pipeline has entered service.

In July, Kinder Morgan Energy Partners LP's EPNG struck a 21-year deal to provide firm gas transportation capacity to CFE (see Daily GPI, July 31). The agreement provides for deliveries primarily to a new point of interconnection with the Sierrita Pipeline along EPNG's South Mainline and also to California.

After running afoul of landowners and local governments on routing, the pipeline project reached a mitigation agreement with local county officials in mid-June, clearing the way for Federal Energy Regulatory Commission (FERC) approval to begin construction, opening the door wider to future U.S. natural gas exports. To gain approval, KM agreed to monitor the pipeline and surrounding area for 20 years and pay the county $4 million to offset environmental degradation and mitigate the loss of any riparian habitat in the Altar Valley south of Tucson (see Daily GPI, July 2; June 6).

Earlier this week, NET Mexico Pipeline Partners LLC was given a FERC clearance allowing it to place its 2 Bcf/d-plus Texas-to-Mexico natural gas pipeline project in service (see Daily GPI, Oct. 30). The project could be online by Nov. 14, NET Mexico told the Commission.

"NET Mexico has completed the tie-in of the [border crossing facilities] project to its upstream Texas intrastate pipeline and to the downstream Los Ramones Pipeline in Mexico," the company said in an Oct. 20 filing at FERC. The border-crossing facilities in Starr County, TX, consist of about 1,400 feet of 48-inch diameter pipeline and end at the international border.

Upstream of the NET Mexico border-crossing is a 124-mile, 42-inch diameter intrastate pipeline, anchored by a long-term firm gas transportation agreement, for up to 2.1 Bcf/d, with MGI Supply, a unit of Mexico's Pemex Gas y Petroquimica Basica that specializes in international gas purchases. The pipeline line runs from the Agua Dulce Hub in Nueces County, TX, to a point near Rio Grande City in Starr County (see Daily GPI, Feb. 25, 2013).

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