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El Paso Strikes 21-Year Capacity Deal With Mexico's CFE

Kinder Morgan Energy Partners LP's (KMP) El Paso Natural Gas Co. (EPNG) has struck a 21-year deal to provide firm gas transportation capacity to Mexico's Comision Federal de Electricidad (CFE).

EPNG will initially provide about 163,000 Dth/d of firm capacity by October. The volume will ramp up to 200,000 Dth/d by October 2017 and increase to 550,000 Dth/d by 2020, KMP said Thursday. The phased capacity increases will be accomplished using existing and expansion capacity on the EPNG system. Spending for this is estimated at $529 million, as previously announced.

Engineering and procurement activities have begun on the first phase of work, which involves system improvements to deliver volumes to the Sierrita Pipeline near Tucson, AZ, by October, KMP said. The second phase will result in incremental deliveries of gas to the Sierrita Pipeline and to California; this is expected to be completed by October 2020. The Sierrita Pipeline is expected to be in service this September (see Daily GPI, July 2; June 6).

"This firm transportation agreement will help CFE to realize its goal of converting numerous fuel oil-powered generation plants throughout Mexico to natural gas, as well as provide transportation for a number of new gas-fired plants currently under development," said KMP's Mark Kissel, president of western region gas pipelines.

The agreement provides for deliveries primarily to a new point of interconnection with the Sierrita Pipeline project along EPNG's South Mainline and also to California.

Service is to be provided using existing capacity available on EPNG's North Mainline, along with undertaking certain system upgrades to enhance deliverability to the South Mainline.

In order to facilitate the full 550,000 Dth/d of service by October 2020, EPNG is planning an expansion that would consist of looping its Havasu Crossover line and installing new compression, as well as undertaking modifications at several existing compressor stations to facilitate west-to-east flow along the South Mainline. This project is included in KMP's $15.4 billion backlog of projects, and the associated volume was included in the 4.8 Bcf of executed and pending firm transport commitments described by KMP in its second quarter results.

Sempra Energy also is involved in pipeline projects to serve Mexico's burgeoning demand for natural gas (see Daily GPI, June 13). So is Energy Transfer Partners LP (see Daily GPI, May 7).

Pipeline exports of U.S. gas to Mexico doubled from 2009 to 2013, and they're poised to double again from 2013 to 2018, driven by growing demand from Mexican industry and power generators and growing supply in the United States, according to Mexico's Secretaria de Energia (SENER) (see Daily GPI, May 29). Pipeline exports of gas to Mexico could reach 3.8 Bcf/d in 2018, more than double the 2013 level of 1.8 Bcf/d, SENER said. Power sector demand in northern Mexico and the interior is driving the demand, but growth is occurring in the southeastern portion of the country as well.

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