Sierrita Gas Pipeline LLC, an indirect subsidiary of Kinder Morgan Inc., has filed an application seeking authorization to build pipeline facilities to export natural gas to serve the power generation market in northern Mexico.

The Sierrita Pipeline project (formerly known as the Sasabe Pipeline project) calls for the construction of a 59-mile, 36-inch diameter lateral from El Paso Natural Gas’s system in Arizona to a point south of Tucson near the international border at Sasabe, AZ. El Paso is owned by Kinder Morgan (see Daily GPI, Nov. 16, 2012). The project, which has an estimated capital cost of $204 million, will have the capacity to deliver 200 MMcf/d of gas.

The Sierrita Pipeline would interconnect with Sempra Energy’s Sasabe-Guaymas Pipeline at the U.S.-Mexico border to supply gas to electric generation. Sempra’s Gasoducto de Agua Prieta currently is securing the necessary permitting within Mexico to construct the new 36-inch diameter pipeline in the State of Sonora, Mexico.

Sierrita has called on the Federal Energy Regulatory Commission to act on its application by Feb. 7, 2014. It said full construction will need to begin no later than March 2014 in order to go into service by Sept. 30, 2014, which is the same in-service date of the Sasabe-Guaymas Pipeline in Mexico. Sierrita said it will soon execute a 25-year transportation service agreement with MGI Supply Ltd. for the full design capacity of the project. MGI Supply is a unit of Pemex Gas y Petroquiimica Basica (Pemex), Mexico’s state-owned gas company.

Concurrent with the development of the Sierrita Pipeline, the Comision Federal de Electricidad (CFE) has been actively developing pipeline facilities in Mexico. In October 2012, Sempra Mexico was awarded two contracts by CFE after a competitive bidding process (see Daily GPI, Oct. 24, 2012). The contracts clear the way for Sempra to build two pipe segments that would interconnect to the U.S. interstate pipeline system in Arizona and would provide gas to new and existing CFE power plants that currently use fuel oil.

The first segment, a 36-inch diameter, 310-mile pipeline, would run from Sasabe, south of Tucson, AZ, to Guaymas, Sonora, and would have capacity of 770 MMcf/d. It is expected to begin operations in late 2014. The second segment from Guaymas to El Oro, Sinaloa, is to be a 30-inch diameter, 200-mile pipeline with capacity of 510 MMcf/d. It is planned to begin operations in the third quarter of 2016.

Also to serve the Mexican power generation market, NET Midstream unit NET Mexico Pipeline LP is planning build a 124-mile, 42-inch diameter gas pipeline to carry gas produced in the Eagle Ford Shale of South Texas to the Texas-Mexico border (see Daily GPI, Feb. 25). The project would be anchored by a long-term fiirm gas transportation agreement for up to 2.1 Bcf/d with MGI Supply.

NET Mexico would transport gas from the Agua Dulce Hub in Nueces County, TX, to a point near Rio Grande City, TX, in Starr County. The pipeline, which is targeted for service in December 2014, would supply gas from the Eagle Ford Shale to the expanding power generation and industrial markets in Mexico.

This proposed Sierrita Pipeline is part of an eruption of pipeline projects busting out throughout Mexico in response to its energy ministry’s master plan calling for stepped-up conversions and new generation plant construction of gas-fired plants that use low-priced U.S. gas.

At the same time, Mexico plans to step up exports of its own additional natural gas production to Central American markets, according to a partner in a well connected Houston energy law firm.

The conversion of Mexico’s power plants to natural gas is based on the country having a reliable source of natural gas, Sierrita said in its application. “However, the Mexican government, via the Secretaria de Energia (SENER), has clearly recognized that its national supply of natural gas, as well as the necessary natural gas infrastructure to deliver such supplies, does not support existing and future demand levels.

“In a recent SENER review of Mexico’s natural gas demand needs, the SENER noted that northwest Mexico is projected to require the importation of approximately 918 MMcf/d of gas by 2018,” Sierrita said.

U.S. exports of natural gas to Mexico will grow as the country’s production fails to keep pace with demand and new pipelines on both sides of the border relieve transport constraints, Goldman Sachs said earlier this month (see Daily GPI, Feb. 11). “…[A]ssuming all the pipeline projects start on schedule, we expect U.S. exports to Mexico to grow by 0.4 Bcf/d year over year in 2013 and 0.6 Bcf/d year over year in 2014, compared to a growth rate of 0.3 Bcf/d year over year in 2012,” Goldman analysts said in a note.

As the multiple export projects on the U.S. side of the border gathered pace in 2012. Kinder Morgan was seen as the front runner.

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