Tania Ortiz
President of the Board
AMGN
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View from the Top

The Common Voice of the Gas Industry

Wed, 02/24/2016 - 12:21

Q: What is your perspective on the emphasis the government has put on natural gas as a transition fuel?

A: About five years ago, we started seeing declining gas prices, which allowed Mexico to access a supply of cheap gas from the US. Natural gas is critical for Mexico, and the country is making the right decisions in promoting the development of pipelines to obtain this resource from the US. Natural gas is not only competitive, but it is also a clean and reliable fuel. A lot of people call natural gas a transition fuel, but I think natural gas is going to see longevity in the market.

Q: In light of the new structures, how will the role of CFE change in the development of pipelines?

A: One of the main goals of the Energy Reform was to lower electricity prices by switching generation from fuel oil to natural gas. The Ministry of Energy put together the National Infrastructure Plan. Initially, this was not targeted toward CFE or PEMEX; it was a blueprint of the pipelines that the country needed to ensure access to gas supplies. Nonetheless, CFE is the largest gas consumer in Mexico, so it has a clear interest in ensuring it has access to gas and that the resource is available at a competitive price.

CFE recently started modifying its gas supply strategy and began buying its gas directly from marketers and producers in order to secure an active role in pipeline development. In 2012, CFE issued tenders for 2,000km of pipelines, all of which were awarded, and in the past three years it has awarded five pipelines. CFE is transforming itself into an integrated gas and power company, which are resources that are inherently linked.

Q: Agencies such as CRE and CENAGAS are also undergoing change. How will their roles be modified by the optimization of CFE and PEMEX?

A: CRE will regulate both the gas pipelines and the marketers, ensuring that the transportation companies offer open access, and establishing the regulated rates at which these companies will need to provide services. This regulator will issue permits to the marketing companies, including CFE and PEMEX, to ensure that there is a clear barrier between the pipeline company and the marketing company. Today CFE and PEMEX are the two largest gas marketers in Mexico, but other shippers will soon emerge onto this market.

After 1995, PEMEX continued to have a dominant role in the gas industry, as it was the largest gas supplier in Mexico and owned the National Pipeline System. During that period, many privately owned pipelines were developed, mostly in areas where PEMEX had no presence. Furthermore, CENAGAS will shortly own PEMEX’s pipelines, and CENAGAS’ role will be ensuring open access to those pipelines. PEMEX will become another in a range of users, albeit the largest. The NOC will continue to play an important role in gas marketing, but it will no longer own infrastructure.

Q: What are the main contributions of the AMGN in the development of the Mexican energy industry during the drafting of the Energy Reform?

A: The natural gas industry was opened to private investment back in 1995 and there have been a substantial number of companies that have been involved in the development of natural gas infrastructure and the natural gas market in general since then. The AMGN was created in the late 1980s, and today the Association represents each company that has investments in either natural gas transportation or distribution in Mexico.

In Mexico, every time a new agency issues a regulation, it goes to a public access website and there is a process through which we can submit comments. The AMGN evaluates all the new regulations being drafted. We have debates, and then we submit a proposal as part of this process. I would not call our work lobbying, because lobbying is more political, what we do is more in-depth. The goal of the Association is to include every company that participates in the natural gas industry in Mexico. With the opening of the market, more Mexican and international companies are joining the Association as well as some of the newly created State-owned entities, such as CENAGAS. We are all competitors, but when sitting at the AMGN, we are focused on the same goal of being able to work more efficiently as an industry.