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Sempra to Help Meet Growing Mexico Gas Demand

Mexican state-owned electric utility Comision Federal de Electricidad (CFE) chose a unit of Sempra International to construct, own and operate a 500-mile, $1 billion pipeline network to deliver gas to power plants in the northwestern Mexico states of Sonora and Sinaloa. It's the latest in multiple projects intended to meet growing demand for gas in Mexico, particularly for power generation.

Sempra Mexico was awarded two contracts by CFE after a competitive bidding process. The network is to be composed of two segments that would interconnect to the U.S. interstate pipeline system in Arizona and would provide gas to new and existing CFE power plants that currently use fuel oil. The capacity for each segment is fully contracted by CFE under two 25-year firm contracts denominated in U.S. dollars, Sempra International said.

"These projects represent an extension of our core business in Mexico and an important part of our plan to grow our international business," said Sempra International CEO George Liparidis.

The first segment, a 36-inch diameter, 310-mile pipeline, would run from Sasabe, south of Tucson, AZ, to Guaymas, Sonora, and would have capacity of 770 MMcf/d. It is expected to begin operations in late 2014. The second segment from Guaymas to El Oro, Sinaloa, is to be a 30-inch diameter, 200-mile pipeline with capacity of 510 MMcf/d. It is planned to begin operations in the third quarter of 2016.

"This new pipeline network will provide reliable access to clean natural gas to CFE's plants in Sonora and Sinaloa," said Sempra Mexico CEO Carlos Ruiz. Sempra Mexico has more than 430 miles of natural and liquefied petroleum gas pipelines in all six northern Mexican states.

Gas demand in Mexico is growing, and so are gas imports from the United States.

"Mexico has considerable natural gas resources, but its production pales in comparison to other North American countries and the development of its unconventional shale gas resources is proceeding slowly," the Energy Information Administration (EIA) said in a new analysis of the country. "Mexico's import needs are rising as production stagnates and demand increases, particularly in the electricity sector. Consequently, Mexico will rely on increased pipeline natural gas imports from the United States and liquefied natural gas (LNG) from other countries."

Mexico imported 499 Bcf of natural gas from the United States in 2011, which represented an increase of nearly 50% from 2010, EIA said. As U.S. unconventional gas output boomed, North American prices fell, and Mexico's consumption needs further outstripped its productive capacity. U.S. gas exports to Mexico accounted for about one-third of total U.S. natural gas exports, and more than three-quarters of Mexico's natural gas imports, EIA said.

Kinder Morgan's El Paso Natural Gas Co. LLC (EPNG) recently launched a binding open season for a proposed new pipeline that would extend from its South Mainline System near Tucson to the U.S.-Mexico border near Sasabe. FERC recently approved two companion applications to allow EPNG to modify its border-crossing facilities in Arizona (see NGI, Oct. 22).

In late August the Federal Energy Regulatory Commission (FERC) approved EPNG's request for a presidential permit to build border-crossing facilities at the U.S.-Mexico border to export gas to northern Mexico to serve power plants. EPNG's Norte Crossing facilities (1,500 feet of 36-inch diameter pipe) would run under the Rio Grande River and would connect with the proposed Tarahumara Pipeline at the border, which in turn would deliver gas to power plants to be constructed in northern Mexico. CFE is proposing to build five power plants over the next 15 years to serve demand in the states of Chihuahua, Durango and Coahuila in northern Mexico.

Earlier this year Spectra Energy's Texas Eastern Transmission LP proposed a pipeline expansion to carry Eagle Ford Shale gas across the Mexican border to a delivery point with Petroleos Mexicanos. The expansion could begin service in summer 2014 and would have a maximum capacity of 300,000 Dth/d, Spectra said.

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