As part of ongoing energy reforms, Mexico's National Center for Natural Gas Control (Centro National de Control del Gas Natural—CENAGAS), recently conducted the country's first open season for capacity rights on the national natural gas grid. CENAGAS manages Mexico's Integrated National Natural Gas Transportation and Storage System (Sistema de Transporte y Almacenamiento Nacional Integrado de Gas Natural—SISTRANGAS). SISTRANGAS currently has a pipeline length of 6,256 miles with a total transportation capacity of 6.3 billion cubic feet per day (Bcf/d).
CENAGAS was created in 2014 as the decentralized public entity entrusted with assignment of capacity rights for pipelines that were previously owned, operated, and largely used by Mexico's national energy company (Petroleus Mexico—PEMEX). Historically, PEMEX was the legal monopoly owner of Mexico's pipeline assets. Mexico's energy reform provided a process to dismantle the PEMEX monopoly and transition the energy sector into a more open market where foreign and local companies can compete to offer the best prices and services to customers.
Under Mexico's reforms, CENAGAS now owns PEMEX's pipeline assets and it will reimburse PEMEX in a series of negotiated payments estimated at 9 billion pesos. Mexico hopes that the entry of international firms can shore up the country's stagnant energy sector through the injection of foreign funds, the promotion of economic development, and the introduction of a more competitive energy industry.
In order to transition to the new market structure, two open seasons were scheduled, "Round 0" and "Round 1". During the Round 0 phase, which occurred in October 2016, 1.1 Bcf/d was reserved for Mexico's Federal Electricity Commission (Comisión Federal de Electricidad--CFE) and 1.4 Bcf/d was reserved for PEMEX. Another 1.6 Bcf/d of capacity was reserved for Mexico's independent power producers (IPPs). These IPPs hold long term contracts to sell power to the CFE and are not subject to the any short term capacity auctions. Thus, out of the 6.3 Bcf/d capacity only 2.2 Bcf/d was up for auction for the Round 1 auction.
On May 8, 2017, Round 1 auctions were held and 24 local and international companies requested 3.6 Bcf/d, but CENAGAS allocated only the available 2.2 Bcf/d. PEMEX won most of this allocation with 59% of the awards. The next largest shares went to ENGIE Mexico and ArcelorMittal, each getting 7% of the allocations. ENGIE Mexico provides energy and gas services to public and private sectors in Mexico through its ENGIE MaxiGas subsidiary. ArcellorMittal, one of the largest steel manufactures in the world, operates iron ore mining and steel production facilities in Mexico. Many of its plants use natural gas to generate electricity and as feedstock for industrial processes. Shell Trading Mexico acquired 6% of the allocations and is a natural gas marketer. Groupo Alpha acquired 5% of the natural gas allocations for space and water heating purposes. The company's line of business includes the wholesale distribution of industrial machinery and equipment. The remaining 338 MMcf/d went to 19 other companies. Many of these companies are in the natural gas retailing and marketing business but the list also includes industrial customers such as cement companies.
Overall, companies expressed great interest in injection points supplying U.S. natural gas to Mexican pipelines. The Kinder Morgan Texas Pipeline interconnect at Pesqueria, and the Ramones injection point connected to the Net Mexico pipeline, which bring U.S. natural gas to Mexico, were two of the most oversubscribed injection points with demand exceeding allocated capacity.
Awarded companies have until mid-June to sign capacity contracts with CENAGAS that will last for one year, until June 30, 2018.
