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CFE Changes Tack, Enlists International Firms in Demand-Focused Natural Gas Strategy
Top Mexican officials were in Texas this week laying out their new strategy for natural gas.
Speaking on Wednesday at LDC Forums’ annual US-Mexico Natural Gas Forum in San Antonio, CFEnergía head Miguel Reyes said Mexican utility Comisión Federal de Electricidad (CFE) and international firms would now work together to solve natural gas problems.
CFEnergía is the international marketing arm of CFE.
“We’re working together in partnerships and within the framework of Mexican law to take advantage of excess natural gas capacity,” Reyes told the audience. It was the first time the CFE team had participated at this event in four years, and came amid a trade dispute between the United States, Canada and Mexico, which is centered around energy.
Reyes was joined on stage by TC Energia Vice President (VP) Leonardo Robles, who oversees commercial and business development, VP Juancho Eekhout, of business developments at Sempra Infrastructure, and CFO Christopher Guinta of New Fortress Energy Inc. (NFE).
“We’ve started working on the points and goals we have in common, and put contractual disputes behind us,” Robles said. He was referring to a conflict over natural gas pipeline contracts signed during the previous administration. The CFE had deemed these contracts as unfair to the state firm.
The executive of the Canadian-based pipeline conglomerate said the most important aspect of the partnership was the ability of the CFE to aid in resolving social issues and helping with permitting. This has helped, for example, in the rerouting of a contested segment of the Tuxpan-Tula pipeline, Robles said.
A new flagship TC-CFE project has also been announced, the 1.3 Bcf/d, $4.5 billion Southeast Gateway Pipeline. An extension of the 2.6 Bcf/d Sur de Texas-Tuxpan pipeline, the project would get natural gas from the Lower 48 of the United States into Mexico’s energy-starved southeast.
Robles said he sees that project completing construction by late 2024, with commercial startup at the beginning of 2025. “We’re putting aside our differences to resolve problems,” he said.
‘I Feel Like I Live With The CFE Team’
Sempra’s Eekhout said “we’re uniting forces with CFE.” He said with the help of the CFE, talks were restarted with the Yaqui community over differences on the stalled Guaymas-El Oro pipeline.
CFE would also anchor Sempra’s planned Vista Pacífico LNG export project in Sonora State. “We’ve been working together on Vista Pacifico for the last two years,” Eekhout said. “This would help CFE optimize their pipeline systems. There is excess capacity in that zone.”
Eekhout suggested a final investment decision on Vista Pacifico could come as early as next year. This would be in addition to the first phase of the Energía Costa Azul liquefaction plant, which is under construction in Baja California.
Meanwhile, NFE’s Guinta said he was constantly in Mexico working on the details of their partnership. “I feel like I live with the CFE team,” he said.
[Mexico Matters: Cross-border energy trade between the U.S. and Mexico reached $42 billion last year. Understand this burgeoning trade flow — the projects, politics and natural gas prices — with NGI’s Mexico Gas Price Index. Know more.]
NFE plans to have two offshore “fast LNG” export projects up and running by the end of next year. Each would have a capacity to send out 1.4 million metric tons/year of LNG. These projects would be offshore near the port of Altamira. CFE was helping with permitting, labor and other issues. In return, NFE would share the profits with CFE.
The project would tap into the undersea Sur de Texas-Tuxpan pipeline, and the gas would be liquefied on prefabricated modules on a floating platform. The gas would then be shipped out to international markets on liquefied natural gas vessels.
“All these deals are capital-free to Mexico and Mexicans,” Guinta said. He added that the economic impact to CFE exceeds $4 billion.
NFE plans a third fast LNG unit, deployed at the offshore Lakach gas field. It is targeting the unit to be up and running before the end of the Andrés Manuel López Obrador administration, or the end of 2024.
Turning A ‘Liability Into An Asset’
CFEnergía’s Reyes was critical of the energy reform of the previous administration. He said it was done hastily and “didn’t do CFE any favors.”
It placed a burden on the CFE, Reyes said. “CFE is contracting all of the gas and anchoring all the pipelines. We’re talking about a market where there is no market.”
He said CFE’s new business model was an example of how to turn “a liability into an asset.” It would be focused on increasing the use of the capacity on CFE’s pipelines.
CFE has 8.203 Bcf/d of capacity contracted in Mexico, but only 53% is being used. In the United States, CFE has contracted 11.3 Bcf/d, but only 38% is under use, Reyes said.
Fifteen CFE power plants are to be constructed across Mexico with 7.4 GW of capacity. All of these could use natural gas. Reyes said the CFE would also secure natural gas access to fertilizer plants, to help with food security. Finally, the company is planning an additional LNG export plant, on the east coast, at Coatzacoalcos in southern Veracruz. He invited interested parties at the event to take part in an upcoming tender, which is being planned.
With this strategy, CFE could increase the use of its natural gas transport capacity by 13% in the United States, and 18% in Mexico, Reyes added.
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