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News Article

Natural Gas and Power Generation

Wed, 02/24/2016 - 12:55

Jesús Rodríguez Dávalos, Founding and Managing Partner at Rodríguez Dávalos Abogados
Eduardo Fernando Prud’Homme, Head of the Technical Management & Planning Unit at CENAGAS
Fernando Alonso, Head of Government Affairs at Fermaca
Luis Montgomery, Director General and CEO of ACCESGAS

Rodríguez Dávalos opened the panel reminding the audience that back in 1993, the natural gas transportation and pipeline operation segments began allowing private investment, and this was followed by the creation of CRE in 1995. The framework for natural gas that was established back then dictated the country’s natural gas strategy, making this fuel important component in the national energy strategy and pushing the development of IPPs. “By the end of the current administration, the country’s natural gas capacity will increase almost twofold,” he declared.

Rodríguez Dávalos asked ACCESGAS’ Luis Montgomery about the possibility of using CNG for electricity generation, who said this would be inviable, but CNG is suitable for places with no access to natural gas or for cogeneration and trigeneration processes. Montgomery talked about the opportunities for CNG companies developing last-mile projects and said that having an authority like CENAGAS, which administers capacity in a transparent way, is essential for the industry in general and is particularly helpful for shippers tasked with supplying power generation facilities. He also commented that “companies like Fermaca expand the pipeline system, and bring shippers closer to end users, helping companies like ACCESGAS grow. Also, wherever there are pipelines, there are possibilities to build CNG stations, creating even more business opportunities.”

The next question was directed at Alonso and it asked why the authorities are putting so much emphasis on natural gas as a fuel in the energy transition. Alonso, who represents one of the private companies with the most pipelines under development and operation, relayed that a technological change took place in the 1990s placing natural gas at the forefront of electricity generation, a change he points to as the reason why the authorities have chosen natural gas as the transition fuel that also provides benefits in terms of low greenhouse emissions and is economically attractive at the moment. “Natural gas will also work harmoniously with renewables, as these are intermittent and thus require backup energy.” He said having geographical access to cheap gas makes Mexico one of the most competitive countries in the world due to reduction of electricity costs, ultimatly fostering industrial activity.

The moderator introduced Eduardo Prud’home, highlighting his knowledge about the regulatory aspects related to the country’s pipelines, and proceeded to question him about the most relevant changes that the natural gas industry will notice in the transfer of natural gas assets form PEMEX to CENAGAS. Prud’homme said that, despite the reform that took place in the 1990s, a full structural change was not completed. “A pipeline is a monopoly by nature, but its content does not have to be; it can be open and competitive.” In Prud’homme’s view, when PEMEX operated the pipeline system, the parastatal did not make access to natural gas a priority in the sense that it used its pipelines to sell its own gas, leaving other shippers on the sidelines. “Now, as a result of the Energy Reform, CENAGAS will grant access and foster a competitive gas market,” he commented, and added that ensuring the proper functioning of the Natural Gas Pipeline System for all users will be one of CENAGAS’ largest challenges.