Gas Storage and Green Hydrogen No Longer Pipeline DreamsBy Cas Biekmann | Tue, 07/20/2021 - 11:40
Q: How has the company consolidated its position in the Mexican market over the past year?
A: Enagas is always in search of new opportunities in the energy sector. Mexico needs new infrastructure to achieve its natural gas development program. We have been involved in developments in the southeast of Mexico, taking advantage of our strategic position with our TLA terminal in Altamira to bring natural gas to areas that lack supply, particularly on the Pacific coast and the Yucatan peninsula. Enagas is working closely with the Energy Authorities to help deliver natural gas to Mexican residents, industry and power generation.
Our Morelos pipeline is a further strategic asset for the economic development of Puebla, Tlaxcala and Morelos and help gasify the state of Guerrero and move south toward Oaxaca, close to where the Energy Ministry and CENAGAS are looking to expand and contribute to the wellness of the region. Compressed natural gas, through the establishment of virtual pipelines, can accelerate the delivery of natural gas in regions where the infrastructure is not yet available and contribute to reducing emissions.
The construction of gas storage infrastructure has become a national security issue, especially after February’s events and taking new combined cycle power plant tenders into account. The government, with its focus on energy security, supports this in its planning by aiming to develop natural gas storage and optimize the utilization of the regasification plants like TLA in Altamira.
Q: How can Enagas play a role in overcoming issues such as the delay in crucial supply of natural gas coming from the US?
A: Mexico is becoming increasingly dependent on US natural gas. When Texas suffered the cold snap that halted its energy production in February, natural gas prices skyrocketed and electricity prices soared. Over 5 million households suffered electricity cuts. The large amount of Mexico’s gas-based power generation had to be taken up by other sources, as the government negotiated the purchase of several LNG vessels. CFE calculated that natural gas became 5,000 percent more expensive. Mexico’s northern manufacturing hub suffered greatly, announcing losses as great as US$2.7 billion due to supply cuts. This had grave consequences for exports and formal employment.
However, there were also some lessons that Mexico learned from this. Owing to the availability of storage infrastructure in Manzanillo and Altamira, CFE was able to guarantee the stability and security of supply to the SISTRANGAS network, as well as for CFE’s power production. The event highlighted the importance of LNG infrastructure and the flexibility that it can add to the energy mix. Enagas can provide added value here due to its expertise in managing regasification terminals, and in bringing flexibility and security of supply to the market. LNG tanks are a key storage asset, especially when the energy system comes under duress.
Q: What role do you expect natural gas to play in Mexico’s energy transition?
A: Due to the country’s dependence on US gas, the government’s policy is to bet on energy sovereignty. This will reinforce the intentions to promote production of indigenous gas optimizing the position fuel oil has in the energy mix and allowing CFE to produce power cheaply thanks to PEMEX’s production. Switching this fuel oil to natural gas will make a significant difference in the energy mix, powering the country’s base load. Mexico recognizes the country's international commitments under the Paris Agreement, focusing on reducing greenhouse gas emissions. This represent a major opportunity for Mexico get on track to reach its climate goals, stemming from the Paris Agreement.
Q: Enagas itself is also moving toward renewable energy, especially with green hydrogen. How is the company strategizing to boost this technology in the Mexican context?
A: The Mexican Hydrogen Association (AMH) was founded only a few months ago and is in its early stages. It has received a great deal of interest from many important multinational companies, Enagas among them. Mexico can become an important player in the green hydrogen industry. The country has the right ingredients needed to launch it, beginning with its abundant renewable resources, such as wind, solar, geothermal, hydropower and biogas. It also has important infrastructure, such as pipelines and the possibility for storage in salt caverns. Furthermore, Mexico has a large industrial and manufacturing platform. Other off-takers for green hydrogen, such as the petrochemical industry, e-mobility, long-distance freight and public transport, are also already present. Mexico could launch a green hydrogen project for any of these sectors that already use grey hydrogen. This can be turned green using Mexico’s many renewable resources.
Today, green hydrogen’s adoption does not look to be too far away. Mexico is in a privileged position after all. We can develop a local industry to export to the US, for instance. This would not only target hydrogen itself but also electrolyzers that can be manufactured here. Hardware will be required worldwide very soon. In this regard, I consider Mexico to be one of the Top 10 countries to develop a green hydrogen industry. Enagas is in an interesting position in this regard, with the knowledge and expertise in the matter that it acquired in Europe. I believe we will be an important player in this industry in the near future.
The AMH is a platform that gathers these players and focuses on specific power objectives, allowing companies to make projects happen sooner. The role of researchers, laboratories and universities should not be understated. They have been working on this technology and its applications for many years already and will play an important role in Mexico’s path toward becoming a major green hydrogen player. I have no doubts about the country’s potential.
Q: What are your short-term expectations for the growth of biogas and other renewable gases in the Mexican market?
A: There are many landfills in Mexico, so biogas emissions are already expelled into the atmosphere. As a result, there are various commercial initiatives trying to take advantage of this situation. Especially in agricultural environments, companies can use biomass to produce biogas. Mexico already has a great deal of infrastructure in place as well. Together with the raw material, it is a matter of putting the puzzle pieces in their right place. Biogas will become more common in the Mexican market in the short term, just as hydrogen will.
Enagas is committed to the decarbonization and all these initiatives have a place within this commitment. Non-electric renewable energies such as hydrogen, biomethane and synthetic natural gas are indispensable energy routes that contribute to the development of a circular economy and the global energy transition, helping achieve a carbon-neutral economy. The company has been applying for several of these projects in the EU and promotes a wide range of projects related to renewable gases. All this expertise gathered in Spain can be directly translated to Mexico because it has a great availability of feedstock and renewable resources.
Q: What are be the company’s main near-term objectives?
A: Keeping our assets running optimally, as well as progressing in our sustainability objectives will be key. Between 2014 and 2020, the company reduced its emissions by 63 percent and it will reach carbon neutrality by 2040. Our goal is to protect the environment and work with our nearby communities to enhance their living standards. The company wants to support them the best it can. An initiative to boost female executive participation has been very successful and we want to develop this on a global scale.
In addition, we are promoting new technologies. Enagas is partnering with more than 50 investors in a green hydrogen and biomethane portfolio of 55 projects, with a total investment from all these partners that could reach up to US$7.47 billion. These projects can furthermore receive funding from the EU. What is more, Enagas will keep promoting cost efficiency and savings programs. Our solid cash flow will help reduce net debt and help maintain a solid structure, boosted by excellent liquidity.
Enagas has its “Enagas Emprende” program too, which promotes startups that work on disruptive technologies regarding energy efficiency and renewable gases. We have been supporting several startups and our goal is to bring them to Mexico so that they can contribute to the growth and development of the country. We have an agreement with the UNAM to collaborate on an entrepreneurial initiative that promotes great ideas that could become startups.
Enagas has been present in the Mexican energy market since 2011. It has a participation of 40 percent in the Altamira regasification plant, 50 percent in the Morelos gas pipeline and 50 percent in the Soto la Marina compression station.