Ternium SA, Tenaris SA and Tecpetrol International SA have entered into a memorandum of understanding to build and operate a natural gas-fired combined cycle power plant in Mexico that would supply Ternium’s and Tenaris’s industrial facilities. Together the companies are one of the largest private energy consumers in Mexico. Tecpetrol is a subsidiary of San Faustin SA, the controlling shareholder of both Ternium and Tenaris.

“This project contributes to the long-term competitive position of our industrial activities and strengthens Mexico’s electricity system. The recently announced Energy Reform would enhance the benefits of this significant investment,” said Ternium CEO Paolo Rocca.

The plant would be built in the Pesqueria area of the state of Nuevo Leon, and would have capacity of 850-900 megawatts (MW). The project is subject to a final agreement and approvals from Mexico energy authorities. The total investment is estimated at US$1 billion. The plant is expected to be operational in the fourth quarter of 2016. Tecpetrol is involved in oil and gas exploration and production, and gas and power transportation and distribution.

According to documents available from the website of Mexico’s Secretaria de Energia (SENER), last year Mexico’s power plants consumed nearly 418 Bcf of natural gas, which is up from nearly 391 Bcf in 2011. In the first half of this year, consumption totaled nearly 219 Bcf, according to SENER.

One of two independent power producer (IPP) generation projects currently under construction is a combined cycle plant, the CCC Norte II in Chihuahua. The other IPP project is a wind farm in Oaxaca. There are another four combined cycle generation projects under construction in the “financed, public investment” category, according to SENER. These are in the states of Colima, Sonora, Guanajuato and Morelos. The five projects have a combined capacity of 3,255 MW.

Since 1999, the amount of effective combined cycle generating capacity in Mexico — both IPPs and that held by Mexico’s Comision Federal de Electricidad (CFE) — has trended upward, reaching 6,122 MW for CFE and 11,907 for IPPs last year out of total effective generating capacity from all sources of 53,114 MW.

Exports of U.S. gas to Mexico set a record last year, according to the Energy Information Administration (EIA), growing by 24% to 1.69 Bcf/d. Imports now account for more than 30% of Mexico’s gas supply, and the country’s gas usage is at its highest level ever, EIA said (see Daily GPI, March 14).

Although the country is rich in natural gas and oil resources, gas production has been falling as modest production gains from oil-associated gas are not enough to offset declines in non-associated gas output, Barclays Research analysts said in a note last week. “This is not for the lack of gas resources as Mexico is home to the fourth-largest shale gas reserves in the world,” Barclays said. “Rather, it reflects Pemex’s (state-run Petroleos Mexicanos) inability to keep up with the necessary investments.”

It is for reasons such as this that Mexican President Enrique Pena Nieto is proposing reforms to the country’s energy policy that would allow more private investment, and energy patch expertise, into the country (see Daily GPI, Aug. 14).