Mexico to cut most LNG imports: CFEnergia

CFEnergia, the generating fuels subsidiary of Mexico's state-owned utility CFE, will halt all LNG imports into the Manzanillo and Altamira regasification terminals by early 2019.

"CFE will stop tendering cargoes by the end of this year or beginning of 2019," Guillermo Turrent, CFEnergia's director told Argus. "It all comes down to execution of the pipelines."

CFE has tendered 25 new gas pipelines under the current administration, 12 of which are in operation, seven under construction and three held up by legal action initiated by indigenous communities.

Once all pipelines are in service, import capacity will increase by 6.2 Bcf/d to a little over 11 Bcf/d, while total capacity in Mexico's network could reach 15 Bcf/d in 2019.

CFEnergia imports an average of 65 LNG cargoes each year to the Altamira and Manzanillo terminals, but once the Sur de Texas-Tuxpan and the Manzanillo-Guadalajara pipelines come online by next year, the company expects to import only the rare LNG cargo "to keep the terminal cold," said Turrent.

CFE's Altamira power plant will be connected to TransCanada and IEnova's 2.6 Bcf/d Sur de Texas-Tuxpan marine pipeline by a lateral connection, while flows will be reversed on TransCanada's Guadalajara-Manzanillo pipeline, replacing the need for LNG into either terminal.

The 305km Guadalajara-Manzanillo pipeline currently flows gas from the Manzanillo regasification terminal to El Salto in Jalisco but flows will be reversed in order to take advantage of 2.1 Bcf/d of new capacity from Fermaca's two pipelines that will connect Waha gas at the US border to west-central Mexico by year end.

TransCanada launched an open season for 32.7mn cf/d of fixed capacity on its Manzanillo-Guadalajara pipeline earlier this month.

While LNG imports have been traditionally used as a complement to pipeline supply, LNG imports have steadily increased since April last year. This followed delays to the scheduled start of a series of new import pipelines and reduced flows in the Los Ramones Sur pipeline because of dust build up.

Mexico has three regasification terminals: the 0.7Bcf/d Altamira on the Gulf coast and the 1Bcf/d Costa Azul and 0.5Bcf/d Manzanillo on the Pacific coast.

The Costa Azul facility, owned by Sempra's Mexican unit IEnova, is largely idle and scheduled for reconversion to an export facility, meaning that all three of Mexico's regasification terminals will become largely redundant once the pipeline network is complete.

Mexico's pipeline administrator Cenagas currently buys small amounts of LNG from CFE for system balancing purposes. It is not yet clear whether it would seek LNG supply from a private marketer if CFEnergia halts imports. Cenagas said earlier this year that it was negotiating with the Altamira terminal for LNG storage capacity in order to comply with its obligations under the country's new natural gas storage policy that requires its to have access to operative capacity.

LNG imports averaged 840mn cf/d in May, up 17pc from the 717mn cf/d imported in April and up 24pc from the 680mn cf/d in May a year ago, according to the latest energy ministry data.

Mexico imported around 4.3Bcf/d of natural gas by pipeline in May, up 3.5pc year over year.