Mexico energy regulators last week approved a rule change that would make it more difficult for private sector natural gas shippers to secure transport capacity on the Sistrangas national pipeline network.
The Comisión Reguladora de Energía (CRE) unanimously approved modifications to Resolution 968 passed in 2016. The 2016 measure was meant to level the playing field for natural gas marketers in order to compete with the two dominant players in Mexico’s gas market – state power utility Comisión Federal de Electricidad (CFE) and national oil company Petróleos Mexicanos (Pemex). It was part of a larger effort under the previous government to create a competitive gas market under the framework of Mexico’s 2013-2014 constitutional energy reform.
President Andrés Manuel López Obrador, however, has long criticized the reform and sought to fortify CFE and Pemex as the dominant players in the energy sector.
The 2016 resolution allocated 1.15 GJ/d (1.09 Bcf/d) of capacity on the Sistrangas to CFE and 1.43 GJ/d (1.36 Bcf/d) to Pemex to ensure the state-owned companies would have gas to perform their essential functions. In the case of CFE it is power generation and for Pemex, it is refining and petrochemicals production
If the two state-owned giants wanted capacity to market gas to third parties, however, they would have to compete with their private sector counterparts in open seasons conducted by Sistrangas operator Centro Nacional de Control del Gas Natural (Cenagas).
In addition, any excess capacity not being used by Pemex and CFE also would be made available to third parties via open seasons.
What Does The Resolution Allow?
Last week’s resolution, however, removes the requirement for CFE and Pemex to use their allocated capacity for essential functions. The state-owned firms may now use that capacity for third-party marketing, as long as it does not affect the supply of gas for power generation. In other words, they no longer need to compete for capacity to market gas on the Sistrangas.
Mexico has become increasingly reliant on gas imports from the United States, as Pemex has struggled to maintain domestic production.
CFE has about 21 Bcf/d of transport capacity contracted in the United States, “of which about 8.2 Bcf/d can be imported,” the latest CRE resolution states. Of that amount, CFE is now only using about 3.5 Bcf/d.
According to the resolution, this imbalance would be “mitigated” by the latest modifications, which would allow CFE to market more gas in Mexico.
The resolution also notes that most of CFE’s allocated Sistrangas capacity has been replaced by a separate network of pipelines commissioned by CFE and developed by the private sector. These include TC Energy Corp. and Sempra’s Sur de Texas-Tuxpan offshore pipeline, Fermaca’s Waha-to-Guadalajara system, and Grupo Carso’s Samalayuca-Sásabe system, among others.
As a result, CFE’s use of its Sistrangas capacity to market gas would not affect the reliability of electricity supply, CRE commissioners said in the latest measure.
It would however, affect competition in the gas market, according to Gadex consultancy founder Eduardo Prud’homme.
Under the original rules, “that capacity should be released and allocated to the rest of the world in a general allocation process,” Prud’homme told NGI’s Mexico GPI. “But what CRE is saying is, ‘No, now the capacity that you, CFE and Pemex were allocated for [essential] purposes, it’s okay if you now use that capacity for anything you want.’”
He said, “It’s getting more and more difficult now” for nonstate marketers to compete in Mexico’s gas market. He cited that Cenagas has not held an open season for transport capacity since the inaugural one in 2017. As a result, some shippers awarded capacity in that process have relinquished it, with no word from authorities as to when that capacity would be reassigned.
Prud’homme said “everybody was expecting a general allocation process…to get capacity in the new interconnections that are related with the CFE pipelines” such as Sur de Texas-Tuxpan and the Fermaca system.
“All those points now, new injection points that should have been allocated with a general procedure, and were simply allocated to CFE,” he said.
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