Mexico revives Central America gas and power plan

Mexico has revived an ambitious energy integration program connecting it with Guatemala, Honduras and El Salvador, part of President Andres Manuel Lopez Obrador's plan to increase development in those countries to keep northern migration in check.

A five-project plan presented this week during one of the president's daily press conferences aims to integrate Mexican power and natural gas with the northern triangle region in Central America.

"Power connection between Mexico and Central America needs to be consolidated," said by Alicia Barcena, executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), which developed the plan.

The ECLAC plan would coincide with nearly $10bn/year in planned spending through 2030 by Mexico. Lopez Obrador said foreign relations minister Marcelo Ebrard would try to negotiate an agreement for such projects with all the countries, including the US.

Lopez Obrador has repeatedly called on transforming the US-driven Merida initiative — which was put forth a decade ago to combat organized crime and foster rule of law in Mexico. He has suggested funds could be routed to boost development in Central America instead of channeling funds for militarization and fighting organized crime.

"We do not want Plan Merida, we do not want armored helicopters," Lopez Obrador said. "We want cooperation for development because that is what will help us pacify Mexico and Central America and for there to be peace and justice with prosperity."

The ECLAC plan includes a $1.2bn, 300MW gas-fired power plant in Honduras fed by a gas terminal in Puerto Cortes, a $300mn power interconnection between Mexico and Guatemala, as well as public works between both countries to increase tourism. The plan also proposes a 710km (441 miles) rail line from Ciudad Hidalgo in Mexico's Chiapas state to ports in El Salvador that would build on pre-existing lines that run through Guatemala.

But the most ambitious project of the five presented yesterday is the 600km (373mi), $1bn Mexico-Guatemala natural gas pipeline, which last gained ground under a preliminary state-to-state agreement signed in April 2014. The pipeline project was part of an agreement signed between the administration of former US president Barrack Obama and the governments of Guatemala, Honduras and El Salvador, with backing from the Inter-American Development Bank.

The original pipeline plan begins in Salina Cruz, in the southern Mexican state of Oaxaca, crosses Chiapas and ends in Escuintla, in southern Guatemala. It is still unclear how much investment would be required for the line to reach Honduras and the planned 300MW power plant, but President Juan Orlando Hernandez said it would cost $700mn in 2015.

The natural gas volumes to Central America would potentially come from the US. Mexico imported some 6 Bcf/d of natural gas on average in 2018, of which over 80pc came from US cross-border pipelines, according to energy ministry Sener. Although an aggressive pipeline development plan during the previous Mexican administration brought gas infrastructure to states that lacked pipelines, there are still no gas lines in the southwest states of Oaxaca and Chiapas, which would be essential to deliver volumes to Guatemala.

Cooperation between Mexico and Guatemala has been thriving for years, with more than 40 bilateral agreements over shared power interests. Guatemala exported some 618.7GWh of power to Mexico in 2018, up from 104GWh exported in 2017 and a dramatic increase from just 27GWh in 2015, according to data from national power administrator Administrador del Mercado Mayorista (AMM).

Guatemala imported 742.5GWh from Mexico in 2018, down from 853GWh in 2017 but significantly up from 185.9GWh in 2013 per AMM data.