Liquified Natural Gas: Mexican Industry’s Optimal OptionBy Cas Biekmann | Mon, 08/03/2020 - 14:31
Q: What is the company’s market penetration in Mexico, and what does it consider to be a recent success story?
A: When Énestas started, it only provided natural gas for the private sector, focusing on oil and gas companies that were not connected to the pipeline network. Today, we include companies that are connected. Recently, the company started getting involved in government auctions, which aim to fix imbalances in the infrastructure. We have entered a couple of bids, but otherwise, Énestas is fully focused on the private sector.
Our market penetration has always been a bit slower than what we imagined. Énestas has covered around half of the Mexican territory in our short, three-year existence. It is merely a question of finding customers in those specific states to which we have not yet ventured. Even though we are introducing a new technology to the market, it has been well-received and that has allowed us to continue our progress. The company’s main Mexican clients are found in the five sectors: transportation, mining, industrial players, agricultural greenhouses and oil and gas. Worldwide, natural gas is used for power generation in oil and gas and mining operations, as they often operate in areas where conventional power does not reach. As for transportation, our gas is mainly used for ships and trains. In the US, federal permits have been acquired to use LNG as a fuel. Hopefully, these types of deals and legislation will also be done in Mexico, allowing the company to continue to develop projects on this front.
We recently built a terminal in Veracruz, which is the first terminal of its type on this continent, and perhaps the world. The terminal receives liquid ethane and LNG. It has been receiving ships since the beginning of the year without incident. It is a very safe and efficient installation. It is also proof that good projects can be constructed in Mexico and operate effectively.
Q: Why should players in the private sector choose the company’s solutions?
A: The product we sell is natural gas. Liquified Natural Gas (LNG) is the method of transportation. In the market, it is considered the optimal hydrocarbon because it boasts low costs and causes significantly less environmental impact than other fossil fuels. It generates energy that is more stable than that coming from renewable resources. We build LNG stations on the customer’s site and convert their equipment, making it an easy switch. LNG is a pure energy form, meaning you can burn almost 100 percent of the fuel, more than with pipeline gas. We work closely with our customers, leaving three to six days of supply at their site. This guarantees they can run their processes normally without running out of gas.
Q: What role does Énestas expect LNG to play in Mexico’s energy mix, considering SENER’s recent policy announcements?
A: We see LNG as the second-cheapest fuel in Mexico, only surpassed by pipeline gas. Although there is no way to compete with pipeline gas, Mexico’s infrastructure is quite skimpy. This allows LNG to have a robust market for the next 25 to 30 years. A great deal of investment is going toward growing the pipeline network, but there is still a long way to go to achieve good market penetration in this regard. Texas, which has a similar GDP to Mexico, has a much higher penetration of pipelines, for instance. The way to supply gas to companies that are not connected to the pipeline network will be LNG for the foreseeable future.
Q: Do you expect the USMCA to boost the usage of pipeline gas?
A: To invest, you first need assurance. It would be best to put your money into a project with clear legal assurances that state that whatever happens it will not be taken away from you. Therefore, USMCA is a good step toward providing these assurances.
Mexico, instead of drilling holes to produce its own gas, chose the easier route: developing pipeline gas. As a result, Mexico benefits from the cheapest natural gas available in the world. I do not see that changing in the near future. Therefore, more pipelines will continue to be built as long as there is assurance from the government that this investment will be protected.
Q: How should the government go about enhancing Mexico’s natural gas infrastructure?
A: Mexico’s government is the biggest consumer of almost any resource. It can justify building any pipeline. The best way would be for public-private associations to start developing pipelines, terminals and compression stations and all other required infrastructure. Interestingly, Mexico does not have any natural gas storage at all. This is certainly an important factor toward energy independence and security, as well as efficient use of the system. There are many investments to be made, some of which the government could participate in. This can be done via private-public associations, or by restarting the auctions that occurred with past governments. Here, both national and international companies could bid and help spur development.
Q: How is the company working to include smart technologies into its portfolio, and how does it invest in the area?
A: This has been a main focus for us since the very beginning. We design and build our equipment to the point where no human interference or operation is required at all. Our equipment also does not need electricity or gas to operate. Furthermore, we have telemetry systems in place to provide complete visibility on how much gas is passing through, pressure, temperature, GPS location and other factors. All of this information is available for our customers at all times, and can be integrated seamlessly into their offices. For us, working from home has not changed us much. We already had all these tools and technologies incorporated from the start in everything we do.
We are a relatively new company and small-scale LNG is not exactly a new concept. Regardless, Énestas is at the forefront of innovation. As an example, we have been developing strategic double-trailer trucks, which are well-suited for the peculiarities of the Mexican transportation system. Another development is how we have almost entirely eliminated any venting or excess pressure gas through our smart systems. Énestas also forms partnerships or does M&As with manufacturers or suppliers of LNG equipment.
Q: How does the company provide both fixed and mobile solutions to clients?
A: Interestingly, most clients do not really notice the difference. This is because we deliver gas the same way, via a small station at each customer’s site. Here, gas is stored, re-gasified and then used. We work with each client individually in this regard. When people talk about LNG, they imagine the Altamira or Manzanillo regasification stations. These examples supply LNG to entire cities. For us, it is more B2B, on a smaller scale.
This type of mobile distribution allows for mobility, meaning that once a customer gets access to a pipeline, the equipment can be moved to another site. The flexibility of our modular solutions is a further added benefit. If a customer wants to grow, we seamlessly add more spaces to the system.
Q: What objectives is the company striving to achieve within the 2020-21-time frame?
A: We expect to grow our distribution network. You would be surprised to know how many industrial parks are using dirtier fuels, which end up costing more. For some businesses, these costs take up 30 to 40 percent of their operational expenses. Saving money while using a cleaner, more efficient fuel can result in a big advantage for their operation. We can now reach Mexico’s southern states. We want to continue working in these places, and find willing customers.
Énestas is involved in the creation of natural gas access and solutions in Mexico. With activities in the generation, distribution and retail of natural gas for vehicles, Énestas is working to become the preferred company for natural gas-related services.