Maintenance, commissioning delays to curb US-Mexico pipeline flows

29 March 2017 03:05 Source:ICIS

The recent volatility in US gas flows into Mexico is expected to continue through the coming weeks, with new pipelines entering operation while existing lines enter maintenance periods.

Dallas-based Energy Transfer Partners was expected to make its 1.3 billion cubic feet (bcf) - 36.8 million cubic metres - per day Trans-Pecos pipeline operational, connecting the Waha gas hub in western Texas with the Presidio border crossing on 31 March, according a filing submitted to the US Federal Energy Regulatory Commission (FERC) on 23 March.

The completion of Trans-Pecos takes the combined export capacity of pipelines feeding from Waha into Mexico’s central north region to 3bcf/day.

However, flows to Mexico from the West Texas hub have yet to surpass 100 million cubic feet (mcf)/day market, with Mexico’s state power utility CFE using the majority of the gas delivered through the pipeline to run power plants in northern Chihuahua.

Market sources expected some additional flows to begin on 1 April, based on contracts signed between CFE and several US natural gas marketers.

These agreements envisage a minimum 100mcf/day flowing from Waha from the start of the second quarter.

The volumes in question will however be less than the 1bcf/day the CFE had originally sought for delivery at Waha through a request for proposal process held over the end of last year. Market sources reported the utility cutting the volumes from those originally requested due to delays in the commissioning of pipelines and power plants in Mexico.

A case in point is the Comanche Trail pipeline, which has been operational since January this year but yet to flow gas due to delays in the San Isidro-Samalayuca pipeline in northern Mexico.

The utilization of Trans-Pecos has also been questioned due to delays in the pipeline connecting the border crossing with central Mexico, Ojinaga-El Encino. Mexican infrastructure company IEnova reported the pipeline as 80% complete as of late February, with commissioning now pushed back until the second quarter of this year.

As a result, one market source suggested that initial flows from Waha starting 1 April might not surpass 10mcf/day, while the line is tested in preparation of the start-up of the Mexican lines. The CFE supply agreements allow suppliers to receive payment even if gas is not flowing.

Maintenance

While the market awaits the initiation of greater export volumes from Waha, ongoing maintenance work on the NET Mexico pipeline in South Texas is expected to cut flows further through the coming weeks.

A drop in flows of around 400mcf/day had already been reported by market sources over late March, due to maintenance work in the US pipeline. Market sources, however, said that a further drop is anticipated for April, when a second maintenance stage begins, which will take up to 850mcf/day in capacity offline.

In total, flows through NET Mexico are expected to average less than 1.2bcf/day through much of April, the source said. The pipeline has been flowing at close to its maximum 2.1bcf/day capacity for much of the past 12 months.

One market source said this maintenance would likely continue into the second half of April. The fall in pipeline flows forced Mexico’s state power utility CFE back into the LNG spot market over the end of March.

A proposed buy tender for the Manzanillo facility on the country’s Pacific coast was postponed in favour of the purchase of two cargoes for delivery to the Gulf Coast Altamira terminal.

By using Altamira, CFE is hoping to offset the loss of cross-border flows from the US. The LNG facility has send out capacity of around 500mcf/day.

According to market sources, the two cargoes were awarded to US-based LNG exporter Cheniere and Swiss trading company Trafigura for delivery between 4-10 and 16-20 of April, respectively.

Following those purchases, the utility was widely expected to return to the spot market seeking at least two deliveries for Manzanillo through April. Term supplier Shell continues to divert volumes to other higher premium markets as part of an ongoing contract dispute with CFE. james.fowler@icis.com

By James Fowler