Daily GPI / NGI The Weekly Gas Market Report / Infrastructure / Mexico

Three Bidders Vie to Build Natural Gas Pipeline Serving New Northwestern Mexico Power Plants

Three companies are bidding for a pipeline project to supply natural gas to power plants in northwestern Mexico.

Mexican state power company CFE on Monday opened technical proposals for the proposed Topolobampo branch line, in the state of Sinaloa.

The three bidders are Infraestructura Energetica Monarca, a subsidiary of TransCanada Corp.; Infraestructura Energetica Nova (IEnova), the Mexico unit of Sempra Energy; and Gas Natural del Noroeste, part of the local conglomerate Grupo SIMSA.

The project entails a 32-kilometer (20-mile), 24-inch lateral pipeline that will supply fuel for two combined-cycle power plants (CCGTs) near the Mexican city of Los Mochis, on the Gulf of California coast. The pipeline will have a capacity of 280 MMcf/d and is expected to cost $55 million, according to CFE.

The two generators, Topolobampo II (890 MW) and Topolobampo III (766 MW), are due to start commercial operations in 2019 and 2020, respectively. Spanish power company Iberdrola SA is building both plants.

The Topolobampo II plant is to reserve 145 MMcf/d of firm capacity on the pipeline, while the other CCGT is to take 135 MMcf/d, according to bidding documents.

CFE is now reviewing the technical proposals. After those are approved, economic offers will be opened on Oct. 13 and a winner announced on Oct. 20. The pipeline is expected to go in service during July 2018.

The Topolobampo branch line will transport gas from TransCanada’s 560-kilometer El Encino- Topolobampo pipeline.

This $1.1 billion,pipeline was supposed to come online in June 2016, but has been delayed by legal disputes with indigenous communities. It went into partial service earlier this year, currently operating at 462 MMcf/d of the planned 670 MMcf/d capacity. Full service is expected by the end of 2017.

El Encino-Topolobampo, in turn, interconnects with IEnova’s 1.35 Bcf/d Ojinaga-El Encino pipeline, which ships in U.S. natural gas from the 1.4 Bcf/d Trans-Pecos pipeline at Presidio, TX. Ojinaga-El Encino went into service earlier this year, but has yet to register much in terms of daily volumes.

Trans-Pecos is one of several pipelines that were established to import gas from the Waha region in West Texas, but delays at El Encino-Topolobampo and other downstream pipelines in Mexico are curtailing demand at the border. Shippers sat out several open seasons for capacity on West Texas border pipelines earlier this year.

Mexico is in the midst of a historic expansion of its natural gas transport system. The 6,400km buildout is concentrated in the northwest and in parts of central Mexico, in areas historically underserved by the existing pipeline infrastructure.

The pipelines are all privately owned and operate independently from Mexico’s main network of natural gas pipelines, Sistrangas. The operator of that system, Cenagas, has said it is working to develop three or four projects to interconnect Sistrangas with new private systems, including an interconnection to Ojinaga-El Encino.

CFE launched the first pipeline tenders in 2012, before the Mexican energy reforms began in 2013. The projects are anchored by 25-year transport contracts to supply the utility’s growing fleet of gas-fired power plants.

The state company has tendered seven of eight planned CCGTs, which would add some 4,800MW to the 73,500 MW Mexican power grid (as of end-2016). The CFE plants include Topolobampo II and III, as well as two others , Empalme I and II, located some 190 miles to the north in Sonora state.

Several private power companies are also independently developing CCGT projects in Mexico. CFE is converting its older fuel oil-burning power plants to natural gas as well.

The Mexican Energy Ministry, Sener, forecasts that Mexico will add nearly 20,000 MW of natural gas-fired combined-cycle plants by 2031. It also expects to retire some 15,800 MW of mostly coal and fuel oil generation capacity over that same period.

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