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Mexico to Invest $85M in Yucatan Natural Gas Infrastructure

Mexico aims to invest about $85 million in two infrastructure projects intended to shore up natural gas supply on the southeast Yucatan Peninsula, which suffers from persistent gas shortages and blackouts.

The first project would reconfigure the Cempoala compressor station on the Sistrangas pipeline network to allow expected gas imports on Mexico's east coast to reach farther south. The second would interconnect the privately owned Mayakan pipeline, which serves power plants on the peninsula, to Sistrangas near the Cactus processing plant in Tabasco state.

The Centro Nacional de Control del Gas Natural (Cenagas), the state-run operator of Sistrangas, is holding a tender for the Cempoala project, expected to cost $36 million. France's Engie SA plans to invest about $49 million in the interconnection project for Mayakan, which it owns through a Mexican subsidiary.

"Due mainly to industrial and commercial growth, the south-southeast region of the country is faced with a natural gas supply deficit," the Energy Ministry (Sener) said. "Sener, Cenagas and Engie are working together to find a comprehensive solution to this problem."

Both projects are part of a three-pronged approach that Mexican energy officials have previously discussed as a way to ease gas shortages on the Yucatan Peninsula. U.S gas imports currently do not reach southeast Mexico, while associated gas production at the southern offshore oilfields operated by Petroleos Mexicanos (Pemex) has dropped sharply in recent years.

The third project is a planned tender for a floating storage and regasification unit (FSRU) at the port of Pajaritos in Veracruz. However, last month the Pajaritos project lost one of its two sponsors, a marketing subsidiary of federal power utility Comision Federal de Electricidad (CFE). The other sponsor, a subsidiary of Pemex, is still preparing the bidding documents.

In May and early June, hot weather, strong demand and limited gas supply led CFE to implement rolling blackouts on the Yucatan Peninsula. Continued high temperatures in the region could lead to further outages this month, according to recent press reports.

Cenagas issued a call for bids on the Cempoala compressor project on June 2. The project entails procuring and installing two turbo compressors and modernizing facility's existing 1.4 Bcf/d system, according to bidding documents.

The reconfiguration work would reverse flows at the compressor station, allowing gas from the Sur de Texas-Tuxpan marine pipeline to displace supply currently moving up from the southeast into central Mexico. The 2.6 Bcf/d marine pipeline, which terminates at the port of Tuxpan in Veracruz and includes a 500 MMcf/d interconnection to Sistrangas, is expected to come in-service by year's end.

Bids for the Cempoala project are due July 12, while a winner is to be announced July 26. Cenagas expects to sign the contract in early August.

The Mayakan interconnection is also timed to roughly coincide with the influx of gas supply from Sur de Texas-Tuxpan.

The project entails a 16-kilometer (10-mile) interconnection to a 48-inch diameter pipeline on the Sistrangas near Cactus, Engie Mexico CEO Fernando Tovar told local press last week. The company expects to begin construction later this year and complete the interconnect by early 2019. It also plans to increase pressure on the Mayakan pipeline.

This work, in conjunction with the Cempoala reconfiguration, is expected to double the Yucatan system's transport capacity.

Mayakan is currently anchored by 243 MMcf/d transport agreement with CFE to supply five combined-cycle power plants on the peninsula.

The 780-kilometer (485-mile) pipeline begins in Tabasco at the Nuevo Pemex gas processing plant and runs north through Chiapas and Campeche before terminating at the city of Valladolid, Yucatan, in the northern half of the peninsula.

In service since 1999, Mayakan was one of the first privately sponsored pipelines to come online after a partial liberalization of the Mexican energy sector in the mid-1990s. Engie completed an expansion project on the pipeline in 2016.

The company has recently proposed extending the pipeline from Valladolid into the state of Quintana Roo, which currently does not have any supply of natural gas. It held a nonbinding open season for the expansion last year.

If there is enough interest, Engie aims to put the 160-kilometer (99-mile) expansion in service by 2020. The project is estimated to cost $300 million.

 

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