CFE Plans to Take Advantage of Natural Gas Surplus

Mexico’s state-owned energy utility CFE will sell surplus natural gas to private players through a new subsidiary, formed by CFE’s CFEnergía arm, reports BNAmericas. Other efforts to turn the surplus into a boon include launching bids to build new power producing plants and to allow exports after liquefaction. By taking such actions, CFE aims to benefit from the natural gas it is already contractually obligated to purchase from third parties but cannot use in its own power plants. The Mexican industry and natural gas liquefaction plants are likely candidates to purchase the gas.

The gas capacity contracts CFE signed to import its natural gas supply have faced a slew of criticism over time. President López Obrador identified seven pipeline contracts signed during the previous administration and considers them ‘unfair’ to CFE, citing its take-or-pay and force majeure clauses as problematic, reported Natural Gas Intel. By renegotiating terms with IEnova, TC Energy and Grupo Carso, CFE could save US$4.5 billion.

Nevertheless, this renegotiation is costing the state an extra US$6.84 billion over the duration of the contracts, the Superior Audit of the Federation (ASF) noted in a report that criticized CFE for its incapability to be profitable on its own. The terms of five out of seven contracts had been extended from 25 to 35 years and established a levelized rate over this period, meaning that CFE will incur in higher costs.

CFE rejected ASF’s general criticism in a press conference last Friday, noting that it managed to lower prices during the first 25 years of the contracts, with an even lower price during the 10-year extension. BNAmericas noted that this argument was not inconsistent with ASF’s report, which focused on a wider scope than the natural gas contracts.

El Financiero reported that Miguel Reyes, Director of CFEnergía, also plans to launch two bids to build two further natural gas-based energy generation plants to put the surplus to good use. “We are going to launch a call in the next few days or weeks, regarding the new plants that CFE is going to build. They obviously will have natural gas as their main input," said Reyes.  

Further plans Reyes mentioned to benefit from the surplus include an extension of pipelines across the country, as well as allowing for the construction of a natural gas liquefaction plant to be able to export the natural gas to Asia. Sempra Energy’s Mexican subsidiary IEnova has been working on this possibility for exports, an option now confirmed by Reyes to be highly feasible.