US utility Sempra looks at Mexico's growth in pipeline natural gas opportunities

07 May 2014  |  By: Edward Cox

US utility Sempra Energy has identified the Mexican government’s latest five-year energy plan as an opportunity to build the company’s footprint in the country, with new natural gas pipeline projects connecting Mexico and the US designed to wean the country from premium LNG spot imports.

An estimated total of $13bn is expected to be invested in pipelines alone through the five-year energy plan, Sempra CEO Debra Reed said during the company’s financial results presentation on 2 May.

In all, about 10 pipelines are expected to be put out for bidding, including gas, naphtha and natural gas liquids projects. A further investment of $7bn in power transmission and another $14bn in power generation projects are also envisaged, Reed said.

Sempra is already undertaking several joint pipeline and power transmission projects in Mexico through various subsidiaries. Two major pipeline projects Sempra is jointly developing with Mexico’s state energy companies are expected to come on line in the second half of 2014.

Sempra’s 799km (497 mile) Sonora pipeline – with a capacity of 770 million cubic feet (mcf)/day or 21.8 million cubic metres/day – will link the US’s Sasabe, Arizona, to Guaymas, Sonora.

A separate 441km of pipeline is also being developed by Sempra’s Gasoductos de Chihuahua joint venture with state-run energy major Pemex as part of the Los Ramones II project.

Sempra’s earnings in Mexico were $42m in the first quarter, a year-on-year increase of $11m, partially caused by a reduction in income tax expense.

Sempra’s buoyant tone about potential growth opportunities in Mexico came just after the federal Mexican government presented its latest series of proposed energy reforms.

The 21 laws – nine of which are new and 12 others presented through amendments – were announced on 30 April by President Enrique Pena Nieto and Secretary of Energy Pedro Joaquin Coldwell.

At the heart of the legislation will be Mexico’s efforts to allow private companies to explore and hold production licences. The reforms must still be passed by the Mexican Congress.

Growing electricity and industrial demand in Mexico has underpinned its appetite for an increased amount of gas imports, primarily through US pipeline imports and by LNG.

According to the US Energy Information Administration (EIA), Mexico’s pipeline imports from the US grew by 6.2% in 2013 from 2012. Pipeline prices averaged $2.86/MMBtu in 2012, according to the EIA, while in 2013 average prices were up to $3.82/MMBtu following the exposure to the US Henry Hub price. Mexico imported 5.67mtpa of LNG in 2013, a 61% increase from 3.52mtpa in 2012, according to the International Group of LNG Importers (GIIGNL).

Mexico aims for more transparency

Mexican state-run utility CFE has announced the signing of an agreement with non-governmental organisation (NGO) Transparencia Mexicana with the aim of improving the transparency of its international tender process.

Through the new initiative, the NGO will perform the role of independent observer in future tenders, beginning with a forthcoming tender for the construction of five pipelines in the north of Mexico.

A framework agreement establishing how the NGO will observe CFE was reached by the director general, Enrique Ochoa Reza, and the president of Transparencia Mexicana, Federico Reyes Heroles.

Ochoa Reza said the transparency agreement was important within the wider context of the country’s energy reform process. Ruth Liao

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