Mexico prepares for debut of gas spot market

Mexico is preparing to roll out a natural gas spot market next year that aims to ensure price transparency and boost liquidity.

A cornerstone of the new rules, issued last month, requires companies that buy and sell gas to report daily transaction data to energy regulator CRE, which will publish average prices in 14 regions of the country on an open web platform, omitting counterparty names.

Each company will be required to provide its transaction information to the CRE-administered online platform by 6pm each day. Companies must provide information about the number of trades registered, where the gas was sold, buyer/seller details, volumes, costs of the molecule, storage, distribution and transport, as well as the sale margin.

Companies are already subject to a monthly reporting obligation. The daily reporting mechanism will create a new level of transparency that will spur market growth, according to industry participants consulted by Argus.

In addition, the data bank will enable industry to better understand gas flows in the national gas pipeline network operated by Cenagas, a system that prior to the launch of the open season was notoriously opaque.

The CRE has issued gas trading permits to about 24 companies so far in a market the regulator estimates would encompass up to 69.2bn gigajoules per month. Permit holders include Shell, US Sempra subsidiary IEnova, France's Engie and Spain's Iberdrola.

The new spot market will start operating after Cenagas awards a first pipeline open season on 25 January 2017.

The open season will allocate a third of total pipeline capacity to new private-sector gas suppliers.

State-run oil company Pemex and state-run power utility CFE were allocated some 40pc of the system's 6.2bn ft3 of capacity, while existing independent power producers were assigned 1.55bn ft3, leaving 2.10bn ft3 or 33.9pc of total capacity up for grabs in the open season.

CRE plans to issue a standard contract by the end of December for all new gas suppliers. Customers with existing contracts will be able to migrate to new suppliers without paying early cancellation penalties, CRE says.

One area of concern in the new gas regulations is a provision that revokes permits for companies that do not trade for a year. Some permit holders are already approaching the year deadline, but cannot start trading because pipeline capacity is still not fully allocated. CRE had no immediate comment on the matter.

The opening of the gas market was born out of a historic energy reform package passed in 2014. The reform dismantled the monopolies of Pemex and the CFE.

The CRE submitted draft regulation for the gas reporting obligation to Mexico's Federal Regulatory Commission (Cofemer) on 4 November, and it was approved on 18 November. The rules were not submitted for official consultation but were publicly available for comment, although no comments were received. The reporting obligation will take effect once it is published in the official gazette.