Mexican President Andres Manuel Lopez Obrador has channeled investment into infrastructure in southeast Mexico, one of the most marginalized zones of the country. New natural gas pipelines and gas-fired combined cycle plants have been keen to that strategy but with just 10 months before his administration ends, a proposed deal between state power company CFE and French pipeline operator Engie to build the 500mn cf/d Cuxtal II gas pipeline has yet to materialize.
Ana Laura Ludlow, sustainability director at Engie, talked to Argus about development and expansion plans:
CFE announced the deal to build the Cuxtal II gas pipeline in southeast Mexico in November 2022, have you reached a final agreement yet?
We are still working on the final definitions of the technical, economic and financial terms of the project.
But I expect to have news of an agreement very soon.
Will the pipeline hold up launch of the Merida and Valladolid combined-cycle gas plants originally scheduled for this year?
That is correct and that is why we are speeding up negotiations because the line is necessary for launch. But in parallel we have already started working on supplies, permits and the prior, free and informed indigenous consultation.
We have concluded the consultation process in Yucatan and will start this week in Campeche.
Once operating, what impact could the Cuxtal II pipeline have on Mexico's nearshoring ambitions?
During this historic moment that Mexico is experiencing we hope to provide robust infrastructure that guarantees access to fuels that are environmentally friendly and competitive on price, enabling companies and investors to relocate to Mexico.
The new gas pipelines are a part of the government's strategy to promote development in the southeast.
What opportunities did the recent open season in the Cenagas-operated state pipeline system provide for Engie?
We secured 24.1mn cf/d of fixed gas transport capacity in the north that give us with the opportunity to provide certainty of supply to our industrial customers in northern Mexico and the Monterrey cogeneration plant.
Cenagas has been carrying out really important work to optimize the gas pipeline system and now, in opening the door to this fixed transport capacity. But it is also important to mention that during those years where there were no open seasons, Cenagas has continued with transport contract renewals, has met industrial needs and allowed us to mitigate supply alerts.
What are Engie's plans for its gas distribution network?
We have distribution permits for Tamaulipas, Jalisco, Queretaro, Bajio, Puebla, Mexico State and Merida and we plan on growing organically in the states where we already have a presence.
Our business also includes two cogeneration plants in Monterrey and Altamira as well as the Ramones Sur, Bajio and Engie Mayakan gas pipelines and 1GW of installed capacity in solar parks that is contracted to CFE. We want to be net zero by 2045 and are helping our customers to decarbonize as well through our diverse offering.
Would Engie be interested in participating in the gas storage projects being developed by Cenagas?
There will be opportunities in the future for operational storage projects that would allow us to strengthen the country's energy sovereignty.
With the experience we have building storage projects in other countries we would be interested in participating.
Residential natural gas use has been stuck at around 7pc for the last 10 years, what are the barriers to expanding uptake?
We are in the residential gas sector and today supply more than 2mn customers and our commitment is to keep making residential gas distribution more accessible.
But we find that there is still a lack of knowledge about natural gas on the part of local governments and potential customers that we are trying to overcome.
