Mexican President Andrés Manuel López Obrador’s energy rhetoric has historically focused more on crude oil and refined products, but recent events have brought natural gas into the spotlight.

The fuel featured prominently in his first Informe de Gobierno, or government report, published on Sunday.

The report lists the achievements and policy goals of the regime at the nine-month mark of López Obrador’s presidency, which has made for a bumpy ride for the energy sector.

In a speech on Sunday unveiling the document, the president touted the resolution of a contractual dispute between state power utility Comisión Federal de Electricidad (CFE) and four natural gas pipeline developers.

The deal has cleared the way for commercial gas volumes to begin flowing on the 2.6 Bcf/d Sur de Texas-Tuxpan subsea pipeline, considered essential for easing gas and electricity shortages in the Yucatán Peninsula.

“With this arrangement, the supply of gas, a fundamental primary material for the generation of electricity and for the development of Mexico, is guaranteed for twenty years,” López Obrador said.

The report highlights efforts undertaken by the Centro Nacional de Control del Gas Natural (Cenagas), operator of the Sistrangas national pipeline grid, “to contribute to the continuous and secure supply of natural gas in the country.”

These efforts include maintaining the balance of gas supply and pressure on the Sistrangas, “as well as increasing transport capacity with the entrance in operation of new infrastructure.”

The report cites the fourth annual revision of the 2015-2019 Sistrangas expansion plan, which includes 2,903 kilometers (1,803 miles) of pipeline projects, the reconfiguration of the Cempoala compressor station, and four interconnections that will allow “operational improvements, and security in the national gas pipeline network.”

Southeast Supply A Priority

The first phase of the Cempoala reconfiguration was completed on June 30, allowing it to send gas from the north to the south and central zones of the country, with a maximum capacity of 1.4 Bcf/d.

Cenagas general director Elvira Daniel said in an August 22 presentation that the second phase, which will allow Cempoala to compress smaller volumes of gas, thereby giving the station more flexibility, would conclude in 2020.

Daniel said that she has a mandate from the president to improve the supply of gas in Mexico’s south and southeastern regions.

For context, she said that 85% of Mexico’s industrial gas consumption is concentrated in the north, where the pipeline network stretches 13,000 kilometers (8,078 miles).

South and southeastern Mexico, by comparison, only have 3,500 kilometers (2,175 miles) of pipelines, meaning “that, among other things, this has been of the factors that has limited industrial development in the south-southeast of Mexico,” Daniel said.

Entrance into operation of the Tecolutla and Lerdo compressor stations will allow an additional 600 MMcf/d to flow to the region, Daniel added. Energy secretary Rocío Nahle has instructed for a tender process to be launched for these two projects.

Citing that pipeline injections from the north are “insufficient,” Daniel also said that Cenagas is working with CFE and state oil company Petróleos Mexicanos (Pemex) to ensure the capacity to inject 600-800 MMcf/d into southeastern Mexico “at competitive prices.”

Industry sources have said that this capacity will likely take the form of a floating storage and regasification unit (FSRU) at Dos Bocas, Tabasco state, where Pemex is building a 340,000 b/d oil refinery.

Daniel said the government will shortly undertake the interconnection of the Mayakan pipeline with the Sistrangas, allowing gas to flow directly from the Sistrangas to the Yucatán region.

Virtual pipelines, i.e. LNG tanker trucks, will also play an important role in ensuring gas supply to industrial consumers in southern Mexico without pipeline access.

Additionally, Daniel said that the inter-oceanic corridor project spanning the Tehuantepec isthmus, will allow gas to arrive to 10 industrial parks slated for construction in the area.

The project of “greatest relevance” being undertaken by Cenagas, however, is the planned integration of all pipelines in Mexico to the Sistrangas, so that all pipelines in Mexico are operated by a single entity.

Softer Stance on Reform?

Although he continues to blame his “neoliberal” predecessors for putting the interests of private firms ahead of those of the Mexican people, López Obrador has taken a less militant tone of late toward the private sector, a shift that was reflected in Sunday’s report.

“The participation of the private sector in the development of Mexico is necessary and is a reality,” he said on Sunday, as he segued into discussing the deal reached on the pipeline contracts.

“I appreciate the collaboration of Carlos Slim, president of Grupo Carso, and the important intermediation of Carlos Salazar and Antonio del Valle, representatives of the Consejo Coordinador Empresarial and the Consejo Mexicano de Negocios.”

The latter two groups represent the interests of Mexican businesses. Grupo Carso owns the Samalayuca Sásabe pipeline, one of the projects at the center of the dispute with CFE, and is helmed by Slim, who ranked No. 5 on Forbes Magazine’s 2019 list of the world’s richest people.

Slim also was a major stakeholder in a $13 billion international airport project that López Obrador cancelled after a referendum in which about 1% of the population participated.

López Obrador also appears to have softened his stance on the 2013 opening of Mexico’s energy sector. In past speeches, he has called the constitutional reform a “complete failure” and a threat to Mexico’s energy sovereignty.

He suspended oil and gas bid rounds, a hallmark of the reform, saying that the awarded projects were taking too long to reach the production phase.

Sunday’s report, however, acknowledged the “important role” played by the private sector in the hydrocarbons segment, and the recent milestone of first oil reached by Italian operator Eni SpA at the Miztón shallow water field in Mexico’s Cuencas del Sureste basin.

López Obrador last week posted a photo to his Twitter account with Eni CEO Claudio Descalzi, writing, “The Italian company Eni is the first to produce oil four years after the approval of the energy reform…I thanked him for fulfilling his responsibility and for trusting in Mexico.”