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Natural Gas Paves the Road to the Future

By Pedro Alcalá | Wed, 03/11/2020 - 13:08

Mexico Energy Forum 2020’s first panel discussion, held on Wednesday at Mexico City’s Sheraton María Isabel hotel, covered the commodity considered to be the most realistic and best-positioned path toward the transition to a decarbonized future: natural gas. While still technically a hydrocarbon and non-renewable resource, natural gas continues to be the best option to fulfill global energy demand while a decades-long comprehensive transition to renewable sources can take place, according to the panelists.

Moderator and Baker and McKenzie Partner Benjamín Torres-Barrón began the conversation by establishing some of the basic characteristics of natural gas that define it as this best option: its generous abundance, its corresponding consistently low prices and the way in which it enables cheap energy granted it what Torres-Barrón termed “21st century protagonism” as a source of power. He then narrowed down his focus for his first question to the panel, which concerned the role that the natural gas sector must play in the Mexican economy.

IEnova Natural Gas Commercial Director Areli Covarrubias responded by elaborating on Torres-Barrón’s remarks on the advantages of natural gas. She added that natural gas’ cleaner emission profile coupled with its price made it the natural alternative engine for Mexico’s industrial and socioeconomic development. She then detailed IEnova’s experience with Mexico’s natural gas systems, which Covarrubias said was marked by the asymmetry between supply and demand. Supply was limited for a number of infrastructural reasons that made everything more difficult as demand continued to increase, leading power generators that depend on a natural gas feed to reach points of desperation where they “seasonally find themselves grasping to get natural gas from whatever sources they can.” She highlighted the need for a more robust supply platform and more long-term investment in its growth.

ATCO Energía CEO Ramón Basanta agreed with the need for this platform and that the issues were infrastructural, especially given the oversupply available in the US and the fact that low natural gas futures proved that oversupply could be expected to continue for the long term, also necessitating long-term investments. Basanta was clear about the role of natural gas in his assertions. "Natural gas is not a zero-emission fuel; however, for Mexico, it is the fuel with a shorter-term impact to reduce emissions." He added that the actual future of zero emission energy would probably depend on the development of green hydrogen, which technologically still has a number of obstacles in its development. Basanta also noted that natural gas should, in the relative short term, be able to generate the approximately 16 percent of Mexico’s energy mix currently occupied by fuel oil and coal.  

Emerson Strategic Accounts Director for Latin America David Vizcarrondo used his time to describe the technologically advanced state of natural gas monitoring and predictive systems, underlining Emerson’s relationship with CENAGAS along the way to illustrate the public institution’s capabilities to draw its development plans based on accurate digitalized simulations. In Vizcarrondo’s estimation, “automation enables reliable operation and supply.”

While Torres-Barrón continued his positivity regarding natural gas, later choosing to make note of its “little price volatility” and the “certainty” that it grants to users and investors, he also asked panelists to detail the most important obstacles to this resource’s development in Mexico. Covarrubias identified permitting, in particular environmental permits required before project construction can begin and whose issuing was particularly halted during 2019, and community engagement as the two most pressing issues to solve for more projects to go forward more quickly. Basanta identified the main obstruction to be the fact that natural gas in Mexico did not yet operate under a “fully functioning market, not in terms of liquidity, volume, price transparency, information symmetry, or any number of other variables that define a market functioning properly.” Basanta continued by declaring that “the path of pipelines and the general shape of distribution networks needs to be drawn by easily identifiable market needs and incentives rather than regulators or the ideology of a political party.” He concluded his remarks by saying that “without a functioning natural gas market, Mexico will not be able to build a functioning electricity market.”

Photo by:   Mexico Business News
Pedro Alcalá Pedro Alcalá Senior Journalist & Industry Analyst