Idle natural gas pipeline capacity in the southern US belonging to Mexico’s state oil company Pemex and power utility CFE will be opened up to companies who prove successful in the forthcoming round one open season capacity allocation process for Mexico’s pipeline system, market sources told ICIS.
Through negotiations which will be overseen by Mexico’s energy ministry SENER, wholesalers will be able to either formally acquire or lease US capacity from either of the state owned companies.
However, in order to do this companies must prove that they have both supply commitments within Mexico and the necessary access routes through the Sistrangas pipeline system to meet the needs of these clients.
According to one market source, Pemex and CFE collectively hold around 5 billion cubic feet (bcf) - 141.7 million cubic metres - per day in US import capacity.
Imports from the US over the second half of this year, since the July start of initial operations at the southern stage of the Los Ramones II pipeline, have averaged around 3.5bcf/day. However, collectively Pemex and CFE have been allocated only 2.4bcf/day in Sistrangas capacity for their own demand.
The companies will seek to retain existing supply contracts in place with baseload clients and acquired rights holders through the round one open season. However, should consumers previously aligned with CFE and Pemex choose to contract with other companies, at least 2.6bcf/day in pipeline capacity from the US could be made available for wholesalers and Mexican gas consumers.
Most market sources believe that initial capacity transfers in the US will be done on a short term lease basis, as formal capacity transactions would require legal sign off from US authorities as well as pipeline operators. Instead capacity could be made available to lease by CFE or Pemex on the secondary market.
One market source told ICIS that several of the key pipelines feeding into Mexico from the US already have spare capacity unused by both Pemex and CFE.
However, this is not the case in the key NET Mexico pipeline, which connects the Agua Dulce gas hub in Texas to the Los Ramones pipeline.
Currently all of the pipeline’s 2.1bcf/day capacity has been contracted between Pemex (1.6bcf/day) and CFE (500mcf/day).
The pipeline operator NextEra closed an open season for the addition of up to 1bcf/day in additional capacity in the pipeline on 30 September. The results from the open season could not be confirmed prior to publication.
While market sources welcome the move to open up US capacity, many question whether the round one allocation could be undermined by the failure to open up import capacity first.
Fears have been expressed that Mexican consumers will be unwilling to take on the risk of exercising their right to capacity in the Sistrangas network without assurances that they will be able to secure molecules from sources other than CFE or Pemex.
However, Mexican officials point out that capacity in the US pipeline system is owned by the US subsidiaries of CFE and Pemex such as CFEi and Mexgas Supply, which Mexican institutions such as CENAGAS and CRE have no direct authority over.
Instead, the requirement that Pemex and CFE relinquish capacity in the US will be based on the legal principle of encouraging the development of competition in the Sistrangas network, which in turn can only be proved by the participation of other companies in the open season.
Also, the exact amount of excess capacity which each state company holds can only be established once their supply commitments to downstream users have been defined through the open season. email@example.com