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Insight

Natural Gas Distributor Seeks to Expand Activities

Wed, 02/24/2016 - 12:36

As natural gas becomes the anointed transition fuel, the authorities and the incipient CENAGAS are hard at work tracing the future natural gas pipeline network across Mexico’s topography. The private initiative is ready to capitalize on this endeavor and provide its two-decade expertise in the sector. Grupo Diavaz, a leading conglomerate in the gas sector and Compañía Mexicana de Gas’ parent company, is interested in participating in the entire value chain by dividing its involvement across different divisions. Ricardo Ortiz, CEO of Mexicana de Gas, claims E&P, Marine Operations, and the Natural Gas divisions of Grupo Diavaz will play an important role in the oil and gas value chain. He sees opportunities for the company to continue participating in the natural gas sector and even expand into other areas. “Mexicana de Gas is already active in our share of natural gas distribution in Monterrey, and we are already looking at potential investments and new clients in other areas. We are evaluating opportunities in natural gas supply and commercialization for energy producers that will set up operations within our distribution zone.”

For Ortiz, participating as a natural gas provider in different cogeneration or combined cycle projects is an attractive possibility. In fact, he considers carrying out these projects either within the company’s distribution zone or another area. “It is possible that in a few years we may have a power station and a business park that obtain electricity from Mexicana de Gas. Power generation could be another business opportunity for us in the future.” Moreover, the company is also looking at opportunities to take on CNG business through Neomexicana in areas where natural gas is still unavailable. “We know that there are significant possibilities to venture into this market, and we feel that this business line could complement the overall portfolio of Mexicana de Gas,” comments Ortiz. Mexicana de Gas is discussing strategies for developing CNG stations in places lacking pipeline infrastructure. “We consider that CNG for vehicle use will be developed extensively in Mexico over the coming years, and we want to tap into these opportunities accordingly.”

Regarding Mexicana de Gas’ market reach, Ortiz is aware that competition will increase in the near future and even more so because distribution areas will cease to enjoy exclusivity; these will be controlled for a determined period of time to be later offered to other companies, and that is where new participants can enter. Mexicana de Gas will be looking out for new companies that will establish operations in its area of coverage in Monterrey, while increasing its infrastructure capabilities in order to guarantee its natural gas distribution reliability.

Ortiz believes gas imports will increase as a result of the construction of the Los Ramones pipeline, which will distribute natural gas to places that lacked this resource. While the availability will be of great benefit to all, the conditions the Energy Reform has prescribed will allow for increased investments in the construction of further infrastructure for this sector. The outcome will have a positive impact on the development of already established and new industries. At the moment, he says, about 30% of natural gas is imported from the US through pipelines and some LNG imports come in through the Pacific. “I expect natural gas production to increase over the next few years, thus further promoting the availability of this resource. Nonetheless, I am confident that natural gas prices will continue to follow the US standard, resulting in very competitive prices.”

Mexicana de Gas will continue to take advantage of the natural gas culture that exists in Monterrey by considering new investments in infrastructure that supports the connection of new customers for the coming years. Currently, Mexicana de Gas is growing at a rate of 13,000- 15,000 new clients per year in the residential market, helping the company reach its goal of having from 100,000 to 170,000 residential clients by 2018. Mexicana de Gas’ residential clients enjoy the benefit of paying after they have already used the natural gas, every 30 days. Conversely, LPG consumers have to pay for the service up front. Residential clients also benefit from natural gas being safer than other sources like LPG, as natural gas dissipates in the event of a leak.

The company is also taking the necessary steps in order to start serving the new industries that are being set up in Monterrey’s metropolitan area. “One of our most important arguments to attract clients lies in the costs; by comparing the price of natural gas to other fuels, we are able to show them that the best option for them is to use natural gas,” shares Ortiz, citing the natural gas availability in the Monterrey area and the northern part of the country.

Even though Mexicana de Gas intends to maintain its growth rate, it plans to align its strategy with the growing demand for gas in Monterrey’s industrial and residential segments. “The state government of Nuevo Leon has created a division specialized in energy in order to meet its objective of becoming an energy hub. We have been in contact with the authorities and we will be collaborating directly with this division to make it happen,” Ortiz shares. He notes that expanding into other distribution areas, either via pipeline construction or natural gas transportation, is also among the company’s priorities over the coming years.