David Madero
Director General
View from the Top

Meeting Mexico's Natural Gas Needs

Wed, 02/21/2018 - 16:30

Q: What short and long-term challenges has CENAGAS identified in the natural gas market? 

A: To discern our agency’s challenges we need first to understand CENAGAS’ primary objectives. On the one hand, assist in guaranteeing Mexico’s gas supply nationwide. On the other, contribute to this primary resource’s transport and storage in conditions of optimal efficiency, enhancing productivity for all involved in the market. As such, our challenges lie in the implementation of the Energy Reform and achieving our primary objectives.

As a technical manager, we have published the second annual revision of the Five-Year Plan for expanding the gas pipeline network. Through this plan we aim for a greater balance between geographical locations where demand is increasing. We expect to increase our capacity to supply natural gas to those points, with both national production and imports. CENAGAS still indirectly operates, through PEMEX, 9,000km of gas pipelines in a secure, trustworthy and cost-efficient process with solid operational models based on the best practices available and top-tier international standards.

CENAGAS engineered better coordination between the players in charge of bringing gas molecules to the country and those in charge of operating the required infrastructure to transport gas throughout our territory. We are also ready to bid on strategic and socially beneficial projects such as a pipeline from Jaltipan to Salina Cruz and a project to transport gas from the coast of Michoacan to the State of Guerrero. In both cases, we are working closely with local governments to guarantee demand conditions so we can go forward with tendering these projects.  

Our short-term challenge involves the open season we implemented and adjusted to answer the requirements of the market. We consider this successful as we procured, through firm base contracts, 97 percent of available capacity, while pre-existing contracts were maintained, in particular for independent power producers, representing 1.8bcf. The new open season offer includes both CENAGAS and SISTRANGAS pipelines. In this capacity allocation, 2.2bcf were attributed to PEMEX and CFE. For new consumers requiring firm base capacity in the system, we delivered 2.3bcf.

This allocation represents 722 applications in total, 390 private companies with acquired rights, which grant a base firm-contract option, and 332 from the general public. This dynamic contributes to the creation of a national natural gas commercialization market. 

We are pausing the process so companies that received capacity allocation notifications can analyze capacity reserve swap opportunities. Between May 22 and June 16, contracts were signed, formally signaling our operation under the capacity reserve regime starting July 1. 

As for our gas transportation segment, we are delighted to increase our client base from our initial three to more than 20 clients for SISTRANGAS. We are also looking for three-year O&M contracts that reduce our OPEX. We have designed four initial contracts to this end, covering close to 1,900km of gas pipelines according to the strict compliance of our work programs. Another challenge for this segment involves infrastructure modernization. We received 9,000km of pipelines and nine compression stations from PEMEX, as well as a considerable surface infrastructure that requires optimal operational conditions. We are launching four investment programs, sanctioned by the Ministry of Finance: rehabilitation and maintenance of pipelines and compressors, implementation of our SCADA system, modernization of our monitoring systems and measurement stations and financing a risk-based best-practices project to manage the integrity of our infrastructure.

Q:  How is CENAGAS addressing human capital needs to respond to the agency’s upcoming challenges?

A: As a recently created agency, CENAGAS also had to face human capital trials. We integrated professionals with a clear objective of selecting people who create a balance between experience and youth. CENAGAS also made a point of addressing gender issues, as the contingent of female technical and engineering staff plays a major role in our organization. CENAGAS recognizes that both young and senior professionals need to undergo a continuous training process. We are addressing this challenge by identifying the training specificities that we need, as well as being able to attract talent and provide training that shortens learning curves as much as possible.

We are working hand in hand with the industry supported by CONACYT to form a consortium, together with TransCanada and IEnova, to spearhead a group to launch an excellence center in pipeline operation. Also, we need to train a new generation of SCADA operators.

Q: Do you believe NAFTA renegotiations could have an impact on Mexico’s energy security? 

A: I believe it is the other way around. If any NAFTA renegotiation includes an energy chapter, surely it will foster a solidified framework for bilateral cooperation between Mexico and the US. I have reiterated the importance of negotiating this chapter swiftly, clearly and transparently, to dissipate uncertainties. Both sides of the border need to value the importance of our natural gas exchanges. Mexico imports 4bcf of natural gas and we have reason to believe its importation will increase to 7bcf in the next five to six years. Along with the challenges this represents, there are also business opportunities for both parties, backed by a solid regulatory framework.

Q: What role does technology play in helping CENAGAS tackle the country’s natural gas challenges? 

A: We purchased a latest generation SCADA system to manage our pipelines. To capitalize on this tool, we need equally top-tier telecommunications and on-site measurement technologies. Hence the importance of modernizing our whole natural gas value chain for telecommunications and measurement instruments and technologies in particular so all this data can be timely analyzed via SCADA systems to optimize decisions in both emergency situations as well as day-to-day to guarantee enhanced infrastructure management for higher gas quantities at the lowest transportation cost available. 

Q: What role is CENAGAS playing in CFE’s transition from fuel oil to natural gas-powered plants? 

A: CENAGAS has a clear vision in its Five-Year Plan for pipeline expansion as an ongoing and continuous process. We are working diligently to forecast a reliable and accurate projection of natural gas demand, largely based on the electric sector’s consumption for power generation. CFE’s transition process will exponentially increase demand and we are closely monitoring the process and the geographical locations where this augmentation will be most intense to guarantee the availability of adequate transport infrastructure and natural gas supply. We are collaborating by identifying if our available infrastructure plus the infrastructure under development nationwide outside of SISTRANGAS is able and sufficient to cover the electric sector’s demand. If not, we can pinpoint and design the required projects to sustain it.

Q: What is the strategy behind opening regional offices? 

A: In addition to our Mexico City location and the new local office in Villahermosa, we are also going to open offices in the cities of Monterrey, Guadalajara and Chihuahua. This decision targets a more direct supervision of the operational contracts we have with PEMEX and the other companies that participated in the open season. The priorities of these local offices will revolve around overseeing the rights of way and our relationship with landowners and neighbors located close to our infrastructure. 

Q: Could you elaborate on your interconnection and measurement contract with Iberdrola? 

A: We have several natural gas interconnection contracts; we are focused on being as transparent and open as possible, providing a customer service experience that answers any interconnection requirements as needed. This was the case with Iberdrola, another success story for CENAGAS.

Q: How is CENAGAS assisting Mexico’s transition toward renewable energy?

A: By its very nature, natural gas is a transition fuel. As a more efficient and eco-friendly source, the only real challenge in Mexico is delivering it to the places where it is needed. Our support in increasing renewable energy generation, intermittent by nature, lies in developing natural gas-powered electric generation terminals, either as a complement or substitution source during periods of low irradiation or wind speed. Our priorities, then, lie in increasing natural gas coverage nationwide, as well as the natural gas-pipeline expansion triggered by CFE’s capacity purchase through seven infrastructure projects. Also, in the long term, as renewable energy penetration in Mexico’s energy matrix increases, this will render natural gas demand intermittent as well, raising new challenges in terms of supply management, transportation and increasingly flexible systems with higher reaction capacities and natural gas storage infrastructure.