Second straight US-Mexico pipeline capacity auction declared void

11 August 2017 10:15 Source:ICIS

No awards were made in the second straight auction for natural gas pipeline transport capacity in the US belonging to Mexico’s state power utility CFE, according to information posted online on 10 August by auction organiser CENAGAS.

As with the previous auction, held on 10 July, limited interest was recorded in this round, leading CENAGAS to declare the round void.

Just over 2.1 billion cubic feet (bcf), or 60 million cubic metres/day, of pipeline capacity belonging to CFE International (CFEI) - the US-based fuels trading arm of Mexico’s state power utility CFE - in five different pipelines linking gas hubs in the southern US to the border was made available through the auction.

Despite the continued lack of interest, market sources have said that CENAGAS intends to continue holding the rounds on a monthly basis. In a bid to provide more short term supply options, CFEI has also begun listing spare capacity in the 2.1bcf/day NET Mexico pipeline, upstream from the Los Ramones trunkline in Mexico, on a daily basis.

The subsidiary began offering 40,000 dekatherms (Dth) - 38 million cubic feet - per day on 14 August for the 16 August gas day. A second auction for the same volume is expected on 17 August for the 19 August gas day. This same capacity will be offered on an annual basis through an auction planned on 10 September, for contracts beginning 1 October 2017.

Capacity belonging to state oil company Pemex could also be included in future daily and monthly rounds.

The idea of the auctions is to offer companies in possession of Sistrangas capacity alternative supply options to Pemex and CFE. As such, participants can sublease capacity in intra-state pipelines belonging to the state owned companies.

The lack of participation in the 10 August round did not surprise market participants, given that the pipeline capacity on offer is unattractive to the majority of companies seeking to bring gas into Mexico’s Sistrangas natural gas transport system.

Only one of the five pipelines included in the auction actually connects to the Sistrangas network, where over 20 different marketers and industrial consumers hold transport capacity.

That same pipeline - the El Paso Natural Gas system at its interconnection with the Gasoductos de Chihuahua pipeline in northern Mexico - was also the lowest source of potential capacity, with just 16,497 dekatherms (Dth) per day – 16 million cubic feet/day - made available.

The rest of the four pipelines offered in the auction either connect to new infrastructure under construction or to isolated systems in the west of the country.

These pipelines are primarily designed to service CFE power plants, most of which are not currently operating.

As these plants, and new industrial demand tied to the pipelines, come online, Mexican authorities hope that the capacity offered by CFEI will become more attractive on the basis that swaps can be arranged for the supply of molecules to Sistrangas connection points. james.fowler@icis.com

By James Fowler