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Mexican Shippers Clamor for More Pipeline Capacity, NatGas Storage

A survey of Mexican natural gas shippers has revealed 4.62 Bcf/d of mostly new demand for firm transport capacity on the country’s main pipeline system, the Sistrangas.

Of that demand, 90% came from shippers that would reserve capacity on sections of the Sistrangas for the first time or increase their existing capacity reservations, according to the system’s technical operator, the Centro Nacional de Control del Gas Natural (Cenagas).

The remaining 10% consisted of shippers that would maintain their existing firm capacity on Sistrangas (3%) or reassign it to new injection points (7%), Cenagas reported in late October. The survey also showed demand for  3.68 Bcf/d of natural gas storage, as well as 17 MMcf/d of interruptible transport service.

Cenagas polled shippers from Sept. 28 to Oct. 18 in order to gauge the market’s appetite for transport capacity, storage and other services. The voluntary, non-binding public consultation drew the participation of 27 companies -- two producers, 11 marketers and 14 end users -- who submitted 191 expressions of demand.

Based on the survey results, Cenagas reported that shippers appear to have an appetite for transport capacity beyond what the current infrastructure in Mexico can offer.

“While the consultation showed a significant increase in demand for transport capacity over the coming years, it’s important that we evaluate how to serve this demand with the existing infrastructure and via the projects under construction before we go on to sizing new projects, which is part of the second phase of our planning strategy,” the operator said.

Sistrangas has an operational capacity of 6.4 Bcd/d, of which 97% is currently reserved under firm service contracts with shippers. Private shippers won rights to 16% of Sistrangas’ capacity in an open season held earlier this year. National oil company Petroleos Mexicanos (Pemex), federal power utility Comision Federal de Electricidad (CFE) and independent power producers (IPPs) hold the remainder of the reserved capacity.

Private developers are building some 6,400 kilometers of natural gas pipelines, all outside of the Sistrangas network. The projects are anchored by long-term transport agreements with CFE, which is expected to release some of its Sistrangas capacity as the private pipelines come in service.

In the survey, marketers requested the largest volume of transport capacity, followed by power sector consumers and large industrial users, according to Cenagas.

Demand was concentrated in the northeastern states of Nuevo Leon (1.17 Bcf/d of new capacity) and Tamaulipas (664 MMcf/d), both near the South Texas border, as well as farther south in Hidalgo (542 MMcf/d) and Veracruz (826 MMcf/d). Some transport capacity requests were submitted at points outside of the coverage area of the Sistrangas, in the southern states of Chiapas and Quintana Roo.

Shippers also expressed interest in parking and loan services, backhauling, swaps, in-line metering and maintenance on specific laterals, according to Cenagas.

This is the first time that Cenagas has conducted a public consultation of Mexican shippers. The operator will incorporate the data collected from the survey into the upcoming revision of the 2015-2019 Sistrangas expansion plan, due by March 2018.

Cenagas works with the energy regulator, the Comision Reguladora de Energia (CRE), to revise the five-year plan each year, adding and dropping infrastructure projects based on demand forecasts for the system. The Mexican Energy Ministry (Sener) gives the final nod of approval to the updated plan, now in its third revision.

The idea is to conduct the shippers survey once a year at the initial stage of the review process, according to Cenagas’ Eduardo Prud’homme, head of the technical and planning unit.

“The survey is not mentioned in any regulation or law,” he told NGI. “But if it works out, we might propose that Sener institutionalize it in some way -- be it through the administrative rules for integrated systems or an order issued by the Ministry -- so that everyone knows it’s part of our job as the technical operator.”

Cenagas also plans to use the survey data in an upcoming redesign of its tariff scheme, part of a planned shift from a postage stamp system to a more “market-oriented” rate structure. The operator has said the new rates would come into force by July 1, 2018, which is the effective date for contracts in the next open season.

Establishing Mexico’s First Natural Gas Trading Hub

Cenagas is also pushing to establish Mexico’s first natural gas trading hub by next July. The hub would be located in Monterrey, the capital of Nuevo Leon. The city, which is about 140 miles from the Texas border, is a major center of business and industry and is the headquarters for some of Mexico’s largest conglomerates.

Monterrey also sits at the confluence of Sistrangas pipes and two private systems that import gas from Texas -- Kinder Morgan Inc.’s 640 MMcf/day Mier-Monterrey pipeline, which came online in 2003, and Howard Energy Partners (HEP) and Grupo Clisa’s 600 MMcf/day Nueva Era pipeline, due in service by early 2018.

“We originally thought that Ramones would be the first hub, but in reality Ramones is at a point located within Sistrangas -- in other words, all of the contracts there are with Sistrangas,” Prud’homme said. “Whereas, in Monterrey, we are there as the operator of Sistrangas, but so are other transporters that aren’t part of the integrated system, and they’re going to have their own contracts.”

The Mier-Monterrey system already interconnects with Sistrangas. Cenagas is in talks to establish an interconnection with the Nueva Era pipeline, which is to supply two power plants in Escobedo and Monterrey, respectively. The pipeline operators are also working out the details of the proposed hub.

“We’re talking with them about how the hub would work, who would execute the contracts it involves and so on,” Prud’homme said.

In terms of infrastructure, the hub would require the construction of a header system to regulate pressures and redirect gas flows between the different pipelines, as well as a metering system for monitoring custody transfers.

“Really, as far as infrastructure goes, it’s not a huge project like the marine pipeline” on the Gulf Coast, Prud’homme said. “It’s a fairly small investment, but it has tremendous value because it would basically allow the different systems to interact.”

On the regulatory side, CRE has yet to issue guidance on the secondary market for pipeline capacity. These rules would help the operators fully exploit the Monterrey hub and offer shippers more services, as Cenagas hopes to do.

“What we’ve said in our talks with all of the involved parties is that, if possible, we need to hurry up,” Prud’homme said. “There’s a lot of work to do, most of all regulatory. And it’s also internal work for Cenagas because, at the end the day, we have to determine which contractual scheme to use and deal with all the bureaucracy of being a public, regulated entity. But we’re basically looking at how to do this, and we believe that there’s still time to implement the hub by the [July 1] deadline we’ve set for ourselves.”

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