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Despite Delays, Mexico’s Natural Gas Pipeline Buildout Marches On

While natural gas producers in the Permian and Eagle Ford basins have welcomed the recent completion of pipeline projects on both sides of the US-Mexico border, several projects farther downstream in Mexico still face delays.

These pending projects are crucial to easing the natural gas supply glut in Texas, especially in the Permian, where prices in day-ahead trades dipped into the negatives in recent weeks, a trend that is expected to continue in the near future.

Cross-border transport infrastructure brought online this year includes Enbridge Inc.’s Valley Crossing pipeline, Howard Energy Partners and Grupo Clisa’s Nueva Era pipeline system, Fermaca’s El Encino-La Laguna pipeline, and TransCanada’s El Encino-Topolobampo pipeline.

The 168-mile, 2.6 Bcf/d Valley Crossing system extends from the Agua Dulce hub near Corpus Christi, Texas, south through Brownsville, before connecting with the offshore Sur de Texas-Tuxpan pipeline, whose startup is imminent.

Valley Crossing is “a virtual funnel of varying supplies,” Enbridge President of Gas Transmission and Midstream William Turner Yardley said Tuesday at the company’s annual investor day in New York, adding that the pipeline “provides additional market access for the Haynesville, Permian and other supply sources through eight pipeline interconnects at Valley Crossing’s 5.2 Bcf/d Agua Dulce header system.”

Nueva Era, for which Mexican state power utility Comisión Federal de Electricidad (CFE) is the anchor shipper, spans 190 miles from Webb County, Texas, to the power generation and manufacturing hub of Monterrey, Mexico. The system comprises the 17-mile Impulsora pipeline on the Texas side, and the 171-mile Midstream de Mexico pipe south of the border. 

While Nueva Era began operating in June, “flows didn’t start in earnest until mid-August, and it wasn’t until early November -- about a month ago -- that volumes really picked up,” RBN Energy analyst Housley Carr said this week.

Citing that “peak flows on the new system have not exceeded 180 MMcf/d, or less than 30% of Nueva Era’s 630 MMcf/d capacity,” Carr said, “there’s only upside from here,” since Nueva era will also supply gas to a 866 MW combined-cycle gas turbine under construction by Iberdrola that is set to come online by the third quarter of 2019.

Carr said Nueva Era will supply gas to “a number of existing and planned generators in the Monterrey area, including CFE’s 450 MW Huinalá combined-cycle plant in Pesquería (on the east side of Monterrey), and... Iberdrola’s 878 MX Noreste combined-cycle plant in El Carmen (on the northwest side of Monterrey).”

El Encino-Topolobampo, for which TransCanada held a formal inauguration ceremony on Friday, began operating in July. The Energy Information Administration has called the $1.2 billion, 670 MMCf/d pipeline a vital link for transporting Permian gas to the northwestern Mexican states of Chihuahua and Sinaloa.

El Encino-La Laguna, meanwhile, represents a vital stage of Fermaca’s so-called “Wahalajara” system, which upon completion will allow the transportation of Permian gas from the Waha hub in West Texas to Guadalajara, Mexico’s second-largest city.

Delays Plague Multiple Projects

Fermaca’s La Laguna-Aguascalientes and Villa de Reyes-Aguascalientes-Guadalajara pipelines are the final two pending sections of Wahalajara.

Genscape Inc. Senior Natural Gas Analyst Rick Margolin confirmed this month that Fermaca has pushed back the expected in-service dates for these sections to May 2019 from March 2019, which was itself a postponement from November 2019.

“We expect Wahalajara will flow by pushing out Mexican LNG imports at [Pacific Coast terminal] Manzanillo, offsetting Mexican production declines, and serve some moderate demand growth,” Margolin said in a December 3 blog post.

Margolin added, “Though there will be some pushback on South Texas exports, Wahalajara is expected to ultimately contribute to a net increase in total U.S. pipeline exports to Mexico and Permian exports.”

The Sur de Texas-Tuxpan marine pipeline, meanwhile, is scheduled to enter service in early 2019, according to developers TransCanada and Infraestructura Energética Nova (IEnova).

However, the undersea pipe will only operate at 60% of its 2.6 Bcf/d capacity over the near-term, due to the indefinite suspension of work on sections of TransCanada’s Tuxpan-Tula and Tula-Villa de Reyes pipelines extending into central Mexico, CFE Energía CEO Guillermo Turrent told local paper Reforma.

Also facing delays is Carso Energy’s 472 MMcf/d Samalayuca-Sasabe pipeline, which will transport gas from Waha to Northwestern Mexico.

Carso has pushed back the in-service date to May 2019 from December 2018.

Margolin said Genscape expects the Wahalajara and Samalayuca-Sasabe delays to “have a magnified impact on the Permian by delaying more than 1.1 Bcf/d of anticipated debottlenecking relief.”

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