Natural gas users in Mexico are becoming savvier as they learn how to use the tools created by the country’s 2013-2014 constitutional energy reform, according to independent energy analyst Eduardo Prud’homme.
The legislative overhaul liberalized the gas market and mandated the unbundling of gas transport services and molecule supply on the national pipeline network now known as the Sistrangas.
The Sistrangas was formerly operated by national oil company Petróleos Mexicanos (Pemex), but the job now belongs to Centro Nacional de Control del Gas Natural (Cenagas), an independent government entity that does not consume or market gas.
Due to transport bottlenecks and declining local production, Pemex has been unable to guarantee reliable gas supply to large users in recent years, Prud’homme said Monday during a webcast interview with the Pulso Energético think tank.
In fact, Prud’homme said, that is precisely why state power utility Comisión Federal de Electricidad (CFE), historically the largest consumer of Pemex gas, has sponsored a massive buildout of pipelines to import gas from the United States since 2012.
Since the reform, Prud’homme said, CFE has supplanted Pemex as the leading gas marketer in Mexico.
Through its international and domestic marketing arms, CFE International LLC (CFEi) and CFEnergía, respectively, CFE has been able to offer a more customer-focused and reliable service, Prud’homme said.
While many large industrials continue to get their gas from Pemex, “there are other users who have opted for other types of suppliers,” Prud’homme said.
In addition to CFE, the reform has allowed private-sector shippers such as BP plc, Royal Dutch Shell plc, Engie SA, Macquarie Group Limited and Newpek LLC to enter the fray.
The reform has created “an ecosystem of users capable of offering gas supply contracts to industrial users that are different from those that Pemex traditionally offered,” Prud’homme said.
The most recent IPGN natural gas price index published by Mexico’s Comisión Reguladora de Energía (CRE) included transactions from 25 companies. While this figure is dwarfed by the amount of shippers active in the United States, Prud’homme said this is just “the tip of the iceberg.”
Although President Andrés Manuel López Obrador has criticized the reform and suspended competitive auctions for oil and gas exploration, he also has said that he will not seek to undo the legislation, despite holding sufficient majorities to do so in both houses of congress. This is a good sign for the gas market, Prud’homme said.
What’s more, he said, the forces driving increased natural gas demand and imports in Mexico will continue to prevail over the coming years. Perhaps most importantly, domestic gas production is almost certain to keep falling over the next five years.
“In the best case, in the next five years, we will stabilize at current levels of production. Natural gas demand will keep growing, and the gap…will have to be filled by imported gas, both from the Eagle Ford and Permian,” Prud’homme said, referring to the Eagle Ford Shale formation in South Texas and the Permian Basin of West Texas and southeastern New Mexico.
Prud’homme served from 2015-2018 as head of the technical system operations and planning division at Cenagas.