Pemex to triple US gas imports with new pipeline

By LAURENCE ILIFF

MEXICO CITY -- The construction of a natural gas pipeline from southern Texas to central Mexico for Pemex, will allow gas imports from the United States to triple, to around 3 billion cfpd by 2015 to meet increasing demand by industry for the relatively cheap fuel, a Pemex official said.

Alejandro Martinez Sibaja, the Director of Pemex's gas division, said in an interview that Mexican industry is currently hampered by its reliance on more expensive fuels because of the lack of pipeline capacity for natural gas to come across the border.

"The lack of gas means that our industries are having to burn fuel oil," which is currently about three times as expensive as natural gas, Mr. Martinez said.

"A lot of investment is looking to come to Mexico, so we have to respond by providing natural gas as part of our offer to get these companies to come," he said.

The gas supply problem is expected to be alleviated with the Los Ramones project, a pipeline that will carry gas from southern Texas to the central Mexican state of Guanajuato, which is a hub for the Mexican auto industry.

Pemex plans to release bidding rules next week for the longest part of the pipeline, a 460 mile stretch from Nuevo Leon to Guanajuato. Mr. Martinez said the estimated cost of section of the pipeline being tendered is about $1.8 billion.

The first two sections of the pipeline have already been assigned. The 124 mile section from the Agua Dulce gas hub in Texas to the Mexican border will require an investment of about $800 million, and the 71 mile section from the border to the Ramones gas hub in Nuevo Leon state will cost about $600 million, he said.

Comision Federal de Electricidad (CFE), is building a separate natural gas pipeline on the Pacific side of Mexico.

Pemex and CFE are currently importing liquefied natural gas from Nigeria and other nations at about four to five times the price of piped-in gas from the United States, where increased production from shale formations has lowered prices in recent years.

The imported LNG, which arrives by ship, is just enough to keep Pemex pipelines from reaching a critical state due to a lack of pressure. Critical alerts in the past have forced industry to cut back on their use of the fuel.

Mr. Martinez said that while Pemex's immediate goal is to guarantee sufficient natural gas supplies in the short term, he expects the company to eventually increase its own production of the fuel from the current 6.4 billion cfpd by exploiting Mexican shale gas deposits now in the exploration phase.

Mexican President Enrique Pena Nieto has proposed reforming Mexico's government dominated energy industry by allowing more private investment. The three main political parties are negotiating energy reform, a sensitive political issue in Mexico, which nationalized the oil industry in 1938 and relies on oil revenue for about a third of the federal budget.