Natural Gas to Boost Mexico’s Development

You can watch the video of this panel here.

Natural gas is a transitional resource that is allowing Mexico to go from fossil fuels to renewable energy. However, this transition does not need go too fast and the country can take advantage of this resource to boost its development. This was one of the conclusions reached during the second panel of Mexico Energy Forum 2021 on Thursday, Mar. 11, titled “From Source to Consumer: Gas Distribution and Infrastructure.” Experts agreed that natural gas is and will be the most important resource for generating energy in the coming years in Mexico and that recent blackouts have demonstrated the importance of improving natural gas infrastructure to increase the country's energy security.

The panel was moderated by Diana Piñeda, Partner at González Calvillo, who managed the discussion between Areli Covarrubias, Commercial Director at IEnova; José Aparicio, CEO of Siemens Energy Mexico, Aldrich Richter, Managing Director of MAN Energy Solutions Mexico and Alma Monserrat Flores Estrada, Expert in Regulation.

“The blackouts caused by the situation in Texas have demonstrated the vulnerability of the country. These events greatly affected CFE but above all, users and industries,” said Piñeda. She added that Mexico needs to guarantee the supply of natural gas in difficult situations and that it cannot depend on another country (US) for its energy security.

Covarrubias explained that in the last 15 years, Mexico has made an important effort to strengthen its infrastructure. “Ten years ago, we had very restricted systems and natural gas could only be used for specific industries and areas. Today, we have a completely different panorama.” Covarrubias said that to increase Mexico's energy security, the country has to diversify its energy sources and improve the current natural gas infrastructure to meet national demand. Mexico needs to have natural gas storage in case of an emergency and, according to Covarrubias, it is important to start with these projects, since they take a long time to implement. In addition, there must be operational coordination among permit holders, especially when demand is greater; coordinated planning for the expansion of the country’s infrastructure; infrastructure modifications to reach marginalized areas and the implementation of storage terminals, as they continue to be essential for the operation of the natural gas system.

Aparicio, emphasized that natural gas remains the main resource for energy generation in Mexico. “If we add energy storage to our power plants, based on combined cycle technology, we can help prevent blackouts by ensuring stable energy around the clock,” he said. Aparacio also mentioned there is a tendency to use hydrogen. However, he emphasized that natural gas remains the favorite resource. Natural gas is cheaper, as breaking hydrogen is very expensive. Nevertheless, hydrogen prices could decrease in the coming years and it is becoming a popular option to achieve a net zero emissions target. “This hydrogen trend is very popular in Europe, especially in the automotive industry. Mexico also has extreme potential for it. However, its transition has just begun and the country should take advantage of the many opportunities it has with natural gas."

In a recent interview, Aparicio told MBN that Mexico is in a process of transition regarding energy, with drivers like climate change and decentralization. In addition, the pandemic has also shaped the industry. Siemens Energy is working with CFE and other players to provide technology, enhance their cybersecurity, develop combined cycle designs and prepare them to meet Mexico’s growing energy demand. “We are here to support projects and promote hybrid systems but we do not only work on energy generation. We are about to commission an important infrastructure project, a large compression station for one of the main operators of natural gas infrastructure in the country.”

Richter highlighted that natural gas is a transition resource from more polluting resources to renewable energy and explained that the Mexican transition could last a long time, which is the perfect opportunity for the country. Many countries have joined the natural gas trend, as renewables have the problem of fluctuations. However, these problems can be solved by incorporating a sophisticated operator system that predicts these fluctuations or by having robust storage infrastructure.

Storage systems from MAN Energy Solutions can solve many of the problems renewable energy sources present. These are designed specifically to store renewably produced surplus energy, to make it available when needed and reduce problems associated with energy fluctuations. The stored energy can also be used directly in the form of heat, cold or as fuel for transportation. Energy storage not only ensures a sustainable, reliable and economic power supply, but also integrates energy-consuming sectors with power producers. Richter emphasized that having efficient storage systems will be the link between natural gas and renewable energies.

Ritcher agreed that hydrogen energy is expensive, since breaking its bonds costs a lot of money and energy. However, it is a great bet. “Japan is betting on hydrogen not to generate energy but to use it in transportation. It is a great example and Mexico could join this country in the future.”

Flores Estrada emphasized that natural gas is the most important resource for the development of the Mexican economy. There have been many efforts made by the government to improve the natural gas supply problem. “However, we need to increase them to meet the demand,” she said. Among the government's efforts is the balance in adjustment that sought to buy liquefied natural gas to mitigate shortages, as well as the strengthening of the transportation system and development of projects to guarantee gas supply and its storage.

SENER's five-year plan (2020-2024) has a new portfolio of projects that seek to promote natural gas storage. However, we need to strengthen energy policy and infrastructure development to have uninterrupted supply, said Flores Estrada. CENEGAS evaluations have shown there is much infrastructure that can increase supply coverage. Therefore, it is important to carry out joint evaluations for its improvement, in addition to promoting integrated systems. Flores highlighted that virtual pipelines could be a new solution to supply problems, especially in the south where there are hard-to-reach areas. “By ensuring fast delivery, we can help these areas develop faster,” she said.