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FERC OKs Texas-Mexico Gas Pipeline Border Crossing

FERC on Thursday approved border-crossing facilities that are part of a plan by Energy Transfer Partners LP unit Houston Pipe Line Co. LP to ship gas between Texas and Mexico.

The border facilities are part of a project that would include construction of a 23-mile extension of Houston Pipe Line's Edinburg Lateral in Hidalgo County, TX, which is part of the company's intrastate system. Houston Pipe Line sought Federal Energy Regulatory Commission authorization for the 703 feet of 24-inch diameter pipeline that is to be installed under the Rio Grande to reach the international border at the middle of the river.

The export/import facility is to have a design capacity of about 140 MMcf/d and a maximum allowable operating pressure of 1,300 psig. Houston Pipe Line expects the facilities to be operated at around 850 psig, however. On the Mexico side of the border, gas is to be delivered to a pipeline system owned by Pemex Pipeline S.De R.I. de C.V. (see Daily GPI, Oct. 28, 2013).

Houston Pipe Line expects that its Edinburg Extension would eventually connect with other intrastate and interstate pipelines and markets. "It is anticipated that the Edinburg Extension will transport predominantly Texas-sourced gas to the border-crossing facilities, but it may also be used to transport non-Texas-sourced gas in interstate commerce under Section 311 of the NGPA [Natural Gas Policy Act]," the FERC order said.

The order noted that the United States and Mexico are signatories to the North American Free Trade Agreement. It said the border crossing "...is needed to export gas to meet the expanding fuel demand for power generation and industrial activity in Mexico, and authorization for the construction of the facilities therefore will promote national economic policy by reducing barriers to foreign trade and stimulating the flow of goods and services between the United States and Mexico..."

U.S. natural gas exports to Mexico grew by 24% to 1.69 Bcf/d in 2012, the highest level since the data collection began in 1973, according to the Energy Information Administration (EIA). By far, the lion's share of U.S. gas bound for Mexico comes from Texas, followed by gas from California and then Arizona. Imports account for more than 30% of Mexico's gas supply, and the country's natural gas usage also has been charting new heights.

Last November FERC approved NET Mexico Pipeline Partners LLC's request to build border-crossing facilities to export gas from the United States to meet growing demand in the power generation market in northern Mexico (see Daily GPI, Nov. 11, 2013). A number of pipeline projects to increase natural gas connectivity with Mexico have been approved/constructed (see Daily GPI, April 16, 2013).

While Mexico has abundant gas reserves of its own, the country's exploration and production activities have been focused on more lucrative oil targets. Mexico lacks the resources to efficiently develop both gas and oil simultaneously, but that could change in the years ahead with newly permitted foreign investment in the country's upstream sector.

Mexico's Congress last December gave final approval to reforms opening the country's energy industry to foreign investment after 75 years of monopoly control by Pemex (see Daily GPI, Dec. 12, 2013). Outside money, talent and expertise are seen as vital to exploiting the country's vast oil and natural gas reserves and stemming production declines.

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