Mexico's Industry Could Cut Energy Costs in Half via CNG, NGVBy Cas Biekmann | Mon, 10/12/2020 - 09:32
Q: What factors in the market led to the creation of Promotora Energética E3?
A: In the energy sector, traditional fuels such as gasoline, diesel and liquefied petroleum gas (LPG) have been present for a long time. However, a focus on fuels that provide a high energy yield at cheap prices and low ecological impact were not fully integrated into Mexico’s energy mix early on. Therefore, 20 years ago, we brought this vision to Mexico from other Latin American countries. Natural gas represented around 8 percent of Mexico’s energy mix back then. LPG represented over 90 percent. In countries such as Colombia, the percentages were pretty much the opposite. Changing this balance toward natural gas, with its lower environmental impact, was one of the reasons for our existence. For many countries in Latin America, it is a great opportunity to make use of natural gas because access to it is cheap via North America. Having the balance as it was with such low costs was rather nonsensical because the benefits for all of Mexico are clear.
Q: What exactly is the company’s focus in Mexico regarding its portfolio staples compressed natural gas (CNG) and natural vehicular gas (NGV)?
A: Regarding vehicles, we set out to change gasoline and diesel to NGV. The cost for a liter of gas or diesel is around MX$20, whereas NGV costs half as much. The issue is that much of the present infrastructure needs to be changed to accommodate NGV. Our company takes care of helping and promoting the search for investors looking to spend on these stations. The door to so-called multimodal stations has been opened. We have worked for many years to make sure that PEMEX allows the construction of such stations. Now, the government is working on regulations to make this business possible.
The other theme we work on is CNG for industrial applications. In Mexico, there are restrictions for high-pressure pipelines and transportation to large-scale consumers. The country needs more elaborate infrastructure to bolster its pipeline distribution across the country. However, the possibility to transport gas via roads exists as well. In this regard, you need to take natural gas from a pipeline, compress it and then take it to another site using a truck, which is a completely viable option. When we entered the Mexican market in 2011, this practice was not yet as widespread as in other countries. Therefore, we focused on bringing CNG to large-scale industrial consumers using trucks. In 2011, there were 14 CNG compressors in the country. Road transport was insignificant as well. The country has achieved significant growth in this regard.
Q: How does the company assess the effect of the government’s aim to expand physical natural gas infrastructure and refine its own petrol?
A: Natural gas that is transported via pipelines will always be cheaper than getting it to a location using any other manner of transportation. But building pipelines can be an expensive and complicated process, so having so-called virtual pipelines, where you transport the gas past the pipelines, will continue to play an important role in the market. Even though pipelines are expanded continuously in Mexico, there will always be hard to reach areas. This will provide us with many business opportunities for at least the next two decades. The government’s role in this expansion is very important. However, the market’s demand is strong and is not influenced by the government’s current policies. This also allows us to encounter new businesses opportunities.
The situation with NGV is similar. Of course, we know that there have been significant investments in refineries to be able to fuel Mexico’s transportation industry. But we also know that the country imports a large amount of its fuel used for transportation or for the energy sector. Mexico’s volume demand is so large that no matter the policy, there will still be opportunities.
Q: How has the pandemic changed the outlook for natural gas in Mexico?
A: It is no secret that demand and sales for all types of gas dropped globally during the pandemic. Nonetheless, when the industry reactivated, the need to achieve savings was essential. With a crisis like this, companies see the need to reinvent themselves. Many are looking to go where opportunities lie and have had the time to do their research. If you can halve your costs by switching to natural gas from diesel, it is certainly an appealing option. The economy’s reactivation will be an interesting opportunity for our business as well and an opportunity for Mexico to advance.
Q: What goals has the company set for itself for 2020-21?
A: We want to continue the positive growth we experienced in the past few years. The idea going forward is to get to work, reinforce our company and to look for new opportunities in the market. Toward the end of the year, the outlook is quite positive in this regard, so we have high hopes for the market. Most of all, the company is looking to consolidate its business and activities and navigate out of this crisis without having to cut any staff. Our biggest challenge for this year will be to keep our hopes high, motivate our team and grow our business.
Promotora Energética E3 specializes in the development of energy projects, with a particular focus on compressed natural gas, which includes vehicular gas and applications for Mexico’s industrial players.