Amid uncertainty over the progress of efforts to develop natural gas storage capacity in Mexico, Kinder Morgan Inc. will seek to offer storage solutions in the United States to mitigate system imbalances south of the border.
Mexico’s Sistrangas national pipeline grid “has almost no flexibility,” Tennessee Gas Pipeline Co. LLC’s (TGP) Ernesto Ochoa, head of marketing and asset optimization, told the US-Mexico Natural Gas Forum in San Antonio, TX, earlier this month. TGP is a Kinder Morgan subsidiary.
Last year, under the previous government, Mexico announced a strategic natural gas storage plan that called for 46 Bcf of storage capacity in place by 2026.
However, Ochoa said, “I don’t know if that’s going anywhere.” He said the storage initiative appears to have been put on hold since president Andrés Manuel López Obrador took office last December.
Mexico currently relies on liquefied natural gas for system balancing.
As the country’s gas demand continues to grow, the need for storage will become more acute, Ochoa said, with swings on Mexico pipelines affecting Kinder Morgan’s pipes north of the border that bring gas into Mexico.
To address the issue, Kinder Morgan is planning to make available 4 Bcf of working storage with 400,000 Dth/d of withdrawal capacity near Phoenix, AZ, “to serve, potentially, any customers that are interested in acquiring storage in the United States to help manage that swing in Mexico,” Ochoa said.UNDERSTAND MEXICO PIPELINES: Pre-order NGI’s Mexico Pipelines, Market Points & LNG map today.
The in-service date of this project, which will feed into Kinder Morgan’s El Paso Natural Gas Pipeline, will be four years from the time of contracting, Ochoa said.
TGP also plans to offer 4Bbcf of storage with up to 160,00 Dth/d of withdrawal rights at the company’s new TGP Zone 0 pooling point near Edinburg, TX.
This storage project will provide flexibility for Mexico shippers dealing with the effects of tight pipeline operations in the Reynosa area just south of the border, Ochoa said.
“In an effort to do that, we felt that it was necessary to have a transparent, liquid trading point there so that it can be priced accordingly,” Ochoa said, explaining the logic behind the new pooling point.
Shippers in South Texas and Mexico have struggled without clear pricing points close to the border, Ochoa said, explaining that the pool will provide shippers with a location at which to transact purchases and sales, park and loan, and storage services.
Citing projections from Wood Mackenzie, Ochoa said that U.S. natural gas exports to Mexico are expected to grow by 33%, or around 1.5 Bcf/d, by 2023.
Kinder Morgan currently delivers around 3.1 Bcf/d of gas into Mexico, Ochoca said, and has 3.4 Bcf/d of long-term contracts serving Mexico with a weighted average remaining contract term of 12.5 years.
The company has 5.4 Bcf/d of delivery capability into Mexico via 16 interconnections, 12 direct and four indirect, with Mexico pipeline systems.
Kinder Morgan will look to expand its Mexico footprint via expansions of the Mier-Monterrey pipeline in Mexico and the TGP system in the United States.
The Mier-Monterrey pipeline, Kinder Morgan’s only asset in Mexico, is fully subscribed and moves 640,000 MMBtu/d from the U.S. border to the industrial hub of Monterrey.
By 2028, Ochoa said, Kinder Morgan expects that Mexican gas demand will reach 10 Bcf/d, up from around 8 Bcf/d currently.
Kinder Morgan expects direct imports from West Texas to supply 24% of Mexico’s gas supply by that time, Ochoa said, up from 8% in 2018.
The share of imports from South Texas is expected to be 39% in 2028, compared to 40% in 2018.