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Pemex, Engie, industry win Mexican gas pipeline space

09 May 2017 14:20 (+01:00 GMT)
Pemex, Engie, industry win Mexican gas pipeline space

Mexico City, 9 May (Argus) — France's Engie and heavy industry were among the big winners in Mexico's long-awaited open season for natural gas pipeline capacity awarded yesterday.

Mexican gas pipeline administrator Cenagas awarded 2.3mn GJ/d, or 85pc of the 2.7mn GJ/d of capacity on offer in its national network, to 24 local and foreign companies.

The open season encompassed capacity left over after previous allocations to existing users. State-owned oil company Pemex and utility counterpart CFE were allocated 32pc of the national pipeline system's 6.2bn cf/d (62bn m³/yr) of capacity, while existing independent power producers (IPPs) were assigned 1.7bn cf/d.

Pemex picked up more capacity yesterday through its downstream unit Pemex Transformación Industrial. The company secured the largest amount of available space at 1.4mn GJ/d, mostly within domestic injection points close to gas production areas.

Engie Mexico was the second highest winner with 167,400 GJ/d, across a mix of domestic and cross-border injection points. The new capacity deepens the French company's presence in Mexico.

Engie owns a stake in the 1.4bn cf/d Los Ramones Phase 2 South pipeline, part of a major new midstream network that delivers US shale gas to the Mexican market. The Phase 2 South leg has been operating significantly below capacity for more than eight months because of an apparent design defect. The firm has not commented on the line's status.

Engie distributes gas across Mexico and operates two combined-cycle generating plants with a total installed capacity of 312MW. Engie is also developing a geothermal project in partnership with Reykjavik Geothermal.

As expected, heavy industry emerged as a key competitor for pipeline space in the open season, reflecting a growing trend toward gas-fired power generation and industrial operations, and away from more polluting fuel oil and diesel.

Luxembourg-based steelmaker ArcelorMittal and Mexican industrial conglomerates Grupo Alpha and Industrias Peñoles secured 161,773 GJ/d, 109,556 GJ/d and 19,013 GJ/d, respectively.

Oil majors BP and Shell Trading secured 2,568 GJ/d and 147,866 GJ/d.

While first round bids for capacity exceeded total availability by around 30pc, a second round of bidding saw a redistribution of offers, ensuring no one injection point was oversubscribed.

As a result, no company will be required to pay an additional unitary cost per GJ, a mechanism that had been designed to allocate capacity in the event of oversubscription.

Of the 24 injection points offered in the open season, bids for capacity on all import points attracted the most bids because of the value attributed to gas imported from the US.

Cenagas will provide winning companies with capacity in the system for one year, starting on 1 July, administering 6.3bn GJ in total or 97pc of the total available capacity of the system.