Mexican authorities announce first gas storage strategy

Mexico’s energy ministry SENER and transmission system operator CENAGAS unveiled the country’s new gas storage strategy on 14 December at an event in Mexico City.

Officials from both agencies, as well as national energy regulator CRE and upstream regulator CNH, have produced a strategy which is motivated by the need to reduce gas supply shortages, their economic impact and avoid the eventuality of an emergency.

Currently, about 70% of Mexican gas comes from the US, but having storage is essential as “you don’t want to store your things at a neighbour’s house,” said Paola Berenice Vazquez, subdirector of planning and projects at CENAGAS.

The first part of the storage policy focuses on creating strategic storage of 45bcf, or five days total national consumption by 2025, with the first facilities coming online by 2020.

Producing fields that are no longer economically viable – or certain wells that fall into that category within other fields – are slated to be used as storage facilities.

In total, there are 15 fields under consideration around the country, the list of which is scheduled to be published by SENER this week. Each field will need to be evaluated first by CNH, and then through a public inquiry process by the private sector that will commence in the coming days and run for at least six weeks.

One of the fields that could be used is the Brasil field in the state of Tamaulipas, although there is “no obligation to use it,” David Rosales, SENER’s general director of natural gas and petrochemicals said during the event. The Brasil field was mentioned as a possible location by Energy Secretary Joaquin Coldwell in October (click here to read story).

Once ideal fields have been selected, a tender will be launched to develop the first strategic storage sites. The tender is scheduled to begin after CRE issues formal storage guidelines, and at least some contracts are anticipated to be awarded before the July 2018 elections, according to Rosales and Vazquez.

Some sources however suggested that the timelines outlined above could be too aggressive. The guidelines are expected to come out early next year, according to Rosales, although a CENAGAS official said they could be delayed until later in 2018.

Storing gas in depleted fields has a lower cost when compared with LNG, salt caverns and groundwater reserves, according to Rosales. The cost of creating storage is slated to be socialised across final users, and will result in a $0.027/MMBtu cost increase across the grid.

While the strategic storage infrastructure is developed, the country will rely on operational inventories in the form of the existing Altamira and Manzanillo LNG terminals, Rosales continued.

CENAGAS will be responsible for enabling access to this capacity and informing SENER of the corresponding terms and mechanisms to recover the costs incurred. Any company transacting gas in the national Sistrangas network will be subject to maintaining some operational capacity.

The need for continued operational capacity will be evaluated by SENER once the strategic supply has been established, according to the executive summary of the new policies.

The final part of the framework will oblige gas market participants to report volumes of gas processed, volumes transported by origin and destination and inventory levels by user.

The information is set to be reported weekly and daily in case of emergencies from September 2018 onward, providing greater transparency to the market, according to Rosales. Aleksandra.Snesareva