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Developing Natural Gas Infrastructure in the Americas: the Mexican case. NARUC Committee on Gas Francisco Salazar Diez de Sollano Chairman, CRE July 17, 2007. Introduction: CRE.

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developing natural gas infrastructure in the americas the mexican case

Developing Natural Gas Infrastructure in the Americas: the Mexican case

NARUC Committee on Gas

Francisco Salazar Diez de Sollano

Chairman, CRE

July 17, 2007

introduction cre
Introduction: CRE
  • CRE (Comisión Reguladora de Energía) was created in 1992 as a consulting body to the Secretary of Energy. Its objective was to prepare the rules that would regulate the relationship between the State’s utilities and the private investors in the power sector.
  • In 1995, the Congress passed a reform opening the downstream activities in the natural gas sector. Then, CRE was also constituted as the formal regulator of the energy sector and was given operational and technical autonomy.
  • CRE’s mandate is to promote the efficient development of the activities it regulates. In doing so, CRE looks for a balance between the interest of the consumers and that of the investors.
cre s regulation powers

PMX Sales

Natural Gas

Exploration

Production

Transport

Processing.

Storage

Distribution

Marketing

Bottle Distribution

Surface transport.

PMX

Sales

LPG

Storage

Processing

Production

Pipeline

Distribution

Pipeline

Marketing

CFE & LFC

National

Transmission

Generation

Transmission

Power

Grid

Distribution

Generation

Transmission

Third Parties

Others

Imports / Exports

Imports

Open to private investment

Reserved to the State

Regulated by CRE

CRE’s regulation powers
natural gas demand
Natural gas demand
  • According to the Ministry of Energy(1), natural gas demand was 6.549 bcfd in 2006 .
  • 48% corresponded to the oil sector; 35.7% to the power sector; 14.6% to the industry (including Pemex Petrochemicals), and 1.6% to residential and other services.
  • Natural gas demand is expected to increase at an overall annual rate of 3.9% over the next 10 years.

(1) Prospectiva del mercado de gas natural 2006-2015

natural gas forecast 2005 2015
Natural gas forecast 2005-2015

3.9 %

2.8 %

Source: SENER 2006 – 2015 Prospectiva del Mercado de Gas Natural

gross ng balance 2005 2015
Gross NG Balance 2005-2015

9.49

9.11

8.69

8.28

7.90

7.58

7.05

6.65

6.61

6.11

5.72

natural gas for power plants
Natural gas for power plants
  • Power forecasts 2005-2015
    • 4.8% annual demand growth rate from 191 TWh in 2005 to 305 TWh in 2015
    • 24 GW of new capacity required to meet demand (approx. 49% of current capacity)
    • CFE will install 23,545 MW during the next decade
    • Combined cycle power plants will grow from 33% to 51% of the total capacity by 2015
  • 7.3% average annual natural gasgrowth over the next decade (for power)
natural gas imports 2005 2015
Natural gas imports 2005-2015

Imports will peak by 2015 at 2.2 BCFD

Source: SENER 2006 – 2015 Prospectiva del Mercado de Gas Natural

how to face increasing demand
How to face increasing demand?
  • Continue promoting private investment in
    • Development of LNG terminals along both the Pacific and the Gulf coasts
    • Pipeline infrastructure both to strengthen cross-interconnections and access to new LNG plants
  • Start exploiting coal bed methane reserves
  • Focus Pemex’s investment in areas of paramount interest such as exploration and production of oil and gas
cre s regulation objective
CRE’s regulation objective

CRE’s regulation must:

  • Ensure technical engineering excellence through modern standards and third-party auditing procedures
  • Approve general terms of service that satisfy user’s needs and reflect current practice in industry
  • Approve rates that are competitive and allow fair rates of return to investors
  • Lead to predictable and stable regulatory conditions with adequate flexibility
permits granted by cre
Permits granted by CRE

Capital

Length

Type

Licenses

Investment

(MM USD)

(km)

Transport

12,354

155

1,979

Open

1,744

11,501

20

Access

Non-Open

853

235

135

Access

1,669

Distribution

22

35,494

5

n.a.*

LNG terminals

2,000

TOTAL

182

47,848

5,648

* LNG total storage capacity of 1,250,000 cubic metres

slide12

Mexico’s natural gas transport network

Mexicali

9

S.L. Río Colorado

Imports

Imports

11

15

Cd. Juárez

2

10

PRIVATE PIPELINES

14

NACO

Nogales

Agua

Prieta

Kinder Morgan

Gasoductos de Chihuahua

Igasamex Bajío

Energía Mayakán

Tejas Gas de Toluca

FINSA Energéticos

Transportadora de Gas Zapata

Gasoductos del Bajío

Transportadora de Gas Natural

de Baja California

Ductos de Nogales

Gasoducto BajaNorte

San Fernando

Gasoductos del Río

Agua Prieta

Conceptos Energéticos Mexicanos

Transportadora La Huasteca

Tejas Gas de la Península

Terranova Energía

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

Santa

Ana

Cananea

LIBERTAD

Imports

Chihuahua

Hermosillo

Anahuac

Delicias

Piedras Negras

Guaymas

Cd.

Camargo

Nuevo

Laredo

Monclova

Química

del Rey

Jiménez

Imports

Pandura

Escalón

Miguel

Alemán

Camargo

Hidalgo

Castaños

13

1

6

Gómez P.

Matamoros

Reynosa

Parras

Cd. Lerdo

TOPOLOBAMPO

12

18

Torreón

Monterrey

Saltillo

Cadereyta

Sn. Fernando

Durango

MAZATLAN

C.F.E.

Colinas

ALTAMIRA

PACIFIC OCEAN

SAN LUIS

POTOSI

Campo

Tam.

Zacatecas

Cd. Madero

TAMAZUNCHALE

Tampico

Cancún

AGUASCALIENTES

17

16

3

8

ISLAS

MARIAS

Poza

Rica

Mérida

GULF OF MEXICO

Guadalajara

Tlalchinol

Valladolid

LEGEND

Salamanca

Qro.

C.P.Q.

Poza R.

Tula

C.F.E. El Verde

PEMEX transmission system

Private open access

Project under evaluation at CRE

Feasible project

Feasible LNG terminal

City

Natural gas injection point

Petrochemical plant

Sn Juan

del Río

Sta. Ana

4

230 km

Morelia

Pachuca

Campeche

5

Veracruz

Jalapa

Toluca

C.P.Q.

Matapionchi

7

C.P.Q.

Pajaritos

Uruapan

Cuernavaca

CARIBBEAN SEA

C.P.Q.

La Venta

Puebla

Cd.

Mendoza

Atasta

MANZANILLO

T. Blanca

C.P.Q.

Cd. Pemex

Minatitlán

Nvo. Teapa

Villahermosa

L. Cárdenas

Cactus y

Nuevo Pemex

developing lng terminals
Developing LNG terminals
  • LNG project solutions are varied
    • Having a predictable and transparent regulation gives investors and developers the flexibility to structure their projects in a variety of ways
    • Terminal Developers (TD) can participate in acquisition of LNG through different schemes
    • TD can sign long-term contracts with utilities and shippers and/or assign all or a fraction of the terminal capacity to a marketing function
    • Shippers can arrange for their LNG deliveries or have the terminal/marketer do it.
    • CRE has resolved all LNG applications in approximately 12 – 18 months
developing lng terminals14
Developing LNG Terminals
  • Leading times are currently very long for LNG projects
  • Construction time is typically 3 years
  • There is an increasing demand of LNG terminals, especially in North America
  • Costs of steel and concrete have increased significantly
  • Additionally, liquefaction plants have been delayed in several countries
lng regasification plants

Tijuana

Mexicali

Naco

Cd Juarez

Chihuahua

Reynosa

Monterrey

Cd Madero

PR

Toluca

D.F.

Cd. Pemex

LNG regasification plants
  • Six applications submitted, 5 permits granted
  • Commercial operation: Sep 30th, 2006 (Altamira)
  • ECA (Sempra): operation in March 2008

Libertad

  • Altamira
  • Shell-Total
  • CFE bid
  • 140,000 m3 x 2
  • 0.5 - 1.1 BCFD
  • Baja California
  • 1. ECA (Sempra)
  • 160,000 m3 x 2
  • 1.0 – 1.3 BCFD
  • 2. Shell Baja
  • 170,000 m3 x 2
  • 1.0 – 1.3 BCFD

Topolobampo

Manzanillo

problems
Problems…
  • Private projects associated to private industry and LDC’s have had limited success
    • Large consumers are reluctant to sign long term contracts
    • Pemex’ supply and services are preferred
    • Competing fuels are priced with non-market criteria
  • As a result, most transport and LNG infrastructure is tied to CFE’s need for CC generators and Pemex’ requirements
  • Most of the new combined cycle power plants are located near Pemex’ transmission system or LNG terminals
  • Both companies dominate the gas market
towards a new transport model
Towards a new transport model
  • CRE is currently reviewing PEMEX SNG (national pipeline system) rates, the methodology to calculate them and the corresponding tariffs.
  • The idea is prepare SNG to be the main part of a National Integrated Transport System (SNI)
  • Issues being discussed include using a postage stamp instead of a mcf mile methodology, desired levels of central planning and expansion of the system, roll-in criteria, desired degree of competition, etc.
  • Although SENER is responsible for energy policy and planning, CRE’s opinion is central in this issue.
conclusions
Conclusions
  • Natural gas foreseen demand’s growth in Mexico will require infrastructure to secure supply.
  • So far, CRE has developed a predictable, transparent regulation that can accommodate flexibility to investors.
  • Current infrastructure in Mexico has been mainly linked to CFE and PEMEX through long term contracts.
  • New infrastructure to allow regional growth and active private participation in new projects poses regulatory challenges to the CRE.