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Mexico Awards Contract For Pipeline That Would Carry U.S. NatGas

A unit of Grupo Carso S.A.B. de C.V (Carso Electric S.A. de. CV) won the bid from Mexico's Comision Federal Electricidad (CFE) to construct and operate the Samalayuca-Sasabe Pipeline, a natural gas system that would run through the Mexican states of Chihuahua and Sonora. Through a proposed interconnecting pipeline, the project would have access to U.S. gas from Waha, TX.

The 36-inch diameter, 472 MMcf/d Samalayuca-Sasabe is to be about 403 miles long and would supply CFE power generation facilities (new plants and conversions from fuel oil) in northwestern Mexico. It would connect with the Sasabe Pipeline-Guyamas, which is expected to enter service in October, and also would connect with the San Isidro-Samalayuca Pipeline, which was recently tendered by CFE.

In-service for Samalayuca-Sasabe is expected during November 2017. A formal contract for transportation services between Carso and CFE is still pending, according to CFE.

Through its connection with San Isidro-Samalayuca, the Samalayuca-Sasabe Pipeline would access supply from Waha, TX.

The San Isidro pipeline, to be built in two segments, would provide capacity westward from Waha to San Isidro and then on to Samalayuca. The first segment would run from Waha to the existing Corredor Chihuahua pipeline. The second segment would run from Corredor Chihuahua to the Norte III power plant in Samalayuca in the state of Chihuahua. In total, the 42-inch diameter San Isidro-Samalayuca would be about 15 miles long, according to a CFE presentation slide on the project.

According to CFE, gas demand from power generators in southern Chihuahua is expected to surpass 1 Bcf/d by the end of 2028.

The winning bid for Samalayuca-Sasabe was US$471 million net present value (NPV), which was the lowest NPV offered, according to Carso. CFE said in an announcement the amount budgeted for the project was nearly US$1.27 billion, about 63% more than the Carso bid. CFE said it received five proposals for the project, four of which met the specified technical requirements.

"These projects will allow the CFE to bring natural gas to its plants and the industrial sector in regions where none existed before," according to an English translation of CFE's announcement.

Mexico's demand for U.S. gas has grown significantly in recent years as the country's state-owned Petroleos Mexicanos has concentrated its limited resources on developing more lucrative oil reserves. The country also is turning to gas-fueled power generation as a cleaner alternative to fuel oil.

"A combination of higher natural gas demand from Mexico's industrial and electric power sectors and increased U.S. natural gas production has resulted in a doubling of U.S. pipeline exports of natural gas to Mexico between 2009 and 2013," the U.S. Energy Information (EIA) said in a note last year.

Mexican planners project that U.S. gas exports to Mexico via pipeline will reach 3.8 Bcf/d in 2018. "This would be more than double U.S. pipeline exports to Mexico in 2013, which averaged 1.8 Bcf/d," EIA said. "This projected growth is driven mainly by higher demand from Mexico's electric power sector in both the north and interior of the country."

Separately, CFE recently signed up for capacity on the planned Texas-to-Mexico Nueva Era Pipeline, which is being developed by Howard Midstream Energy Partners LLC and partner Grupo Clisa of Mexico (see Daily GPIAug. 12). Also in the works is the Trans-Pecos Pipeline, which also would move gas from Texas to Mexico. It is backed by Carso and U.S. partner Energy Transfer Partners (see Daily GPIJuly 27).

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