The Mexican energy ministry (Sener) on Thursday put out for public comment its long-awaited natural gas storage policy.
“This document aims to create incentives for strategic and operational inventories that boost the country’s security of supply in natural gas, as well as ensure the efficient use of its existing infrastructure and the development of new storage facilities,” according to the ministry.
The policy also envisions a reporting obligation for gas market participants, which Sener plans to use for a weekly storage report similar to the one published by the U.S. Energy Information Administration.
Currently, Mexico uses its three liquefied natural gas (LNG) imports terminals, with a combined storage capacity of 920,000 cubic meters, for short-term balancing, but it lacks underground storage facilities to cover larger demand shortfalls.
The country is also increasingly dependent on natural gas pipelines from the United States, as was made apparent earlier this year by Hurricane Harvey, which curtailed imports from South Texas and briefly set off a critical supply alert on Mexico’s main pipeline system, the Sistrangas.
The comment period on the policy document will remain open until Jan. 19.
Under the policy, the operator of Sistrangas must hold 45 Bcf of working gas in strategic reserves within Mexico. The inventory requirement is equivalent to five days of gas supply based a 2029 demand forecast.
Sener expects to publish by mid-2018 a natural gas emergency plan that would regulate the use of these inventories.
The strategic reserves must be fully in place by 2025, according to the ministry. To this end, Sener will require that the Sistrangas operator, the Centro Nacional de Control del Gas Natural (Cenagas), tender a series of underground storage projects over the next year.
The projects are to be built at depleted oil and gas reservoirs, which Sener determined as the best storage option for Mexico after reviewing the available technologies. However, if no depleted fields are in an area that requires storage coverage, Cenagas may consider the use of other technologies.
The policy document establishes that Mexico’s strategic reserves must provide full coverage for Sistrangas and its interconnected pipeline systems, with at least one facility in each region where there is demand for storage services.
The document does not specify how many regions might need storage coverage, but Sistrangas, which is comprised of seven different pipeline systems spanning about 6,350 miles, is organized into six tariff zones.
Based on a recently completed geological survey, Cenagas has provided Sener with a list of 15 depleted fields as potential storage sites, located in three basins -- Burgos in northeast Mexico, and Veracruz and Macuspana-Muspac, both in the south. They include one site that was previously highlighted in comments by Energy Minister Pedro Joaquin Coldwell.
Sener plans to work with Cenagas, the energy regulator and the upstream oil and gas regulator to evaluate and identify which of the proposed sites to include in the tender. Cenagas also is expecting to create a data room with the 15 sites to solicit industry feedback before launching the bidding process.
Once the strategic projects are selected, Cenagas would add them to the third annual update of its Sistrangas expansion plan, due by March 31. Sener expects the tender process to run from June to September, with contracts signed by October.
The costs of building the storage facilities are to be transferred to Sistrangas users and all pipelines that interconnect with the national system, according to Sener. Cenagas also would be required to tender any infrastructure necessary to ensure that the gas at the storage sites can flow through the Sistrangas to the external pipeline interconnects.
The facilities may also serve commercial storage demand, which developers would gauge through open seasons. In a recent survey of Sistrangas users, Cenagas identified 3.68 Bcf of gas storage demand in Mexico.
The storage policy also instructs Cenagas to hold operational inventories at Mexico’s LNG facilities for supply balancing on Sistrangas. Specifically, the operator must sign capacity reservation agreements with the Terminal de LNG de Altamira on the Gulf Coast and Manzanillo on the Pacific. The two terminals have a combined storage capacity of 620,000 cubic meters.
The obligation would also apply to other integrated pipeline systems, although Cenagas is currently the only such operator in Mexico. Once the strategic gas inventories are in place, Sener plans to reevaluate the requirement to hold inventories at LNG terminals.
Under the new policy, gas processing plants, integrated system operators like Cenagas, individual pipelines, local distribution companies and gas storage facilities each must file weekly reports to Sener. The ministry plans to use the information collected to publish weekly updates with data on aggregate supply and demand, as well as gas inventories.
The reporting requirements are set to take effect next September. Sener plans to work with the energy regulator to write and issue regulations for the new reports.