David Madero Suárez
Director General
View from the Top

Natural Gas System Operator is Entrusted with Energy Security

Wed, 02/24/2016 - 09:54

Q: What is CENAGAS’ main role, and how will it relate with other entities?

A: Mexico is shifting from liquid fuels to natural gas for electricity generation, making gas security a crucial element in the energy industry. With this in mind, CENAGAS has been entrusted with guaranteeing a safe, efficient, and reliable natural gas supply. The creation of this entity, as well as its efficient operation, is important in order to ensure that the electricity sector will have the cheapest and most eco-friendly feedstock.

CENAGAS was created with the objective of serving as the technical system operator for natural gas. Therefore, it has to carry out several functions, including the planning of the expansion of the natural gas pipeline network, carrying out tenders for strategic projects, and coordinating the system’s operations through automation and remote control systems. CENAGAS will also inherit 9,000km of pipelines from PEMEX, and it has the task of operating them in an efficient, safe, and reliable manner. In this sense, CRE will regulate the center’s four core activities, so we will maintain a close and intense relationship with this authority. We will become the Commission’s main regulated organism for natural gas.

As for other entities, CENAGAS will provide much-needed gas transportation services to CFE. We will work on the sectorial coordination so that we can react immediately and in the most efficient way in cases where there are problems in the national supply or any other operational problem with the pipelines or compression stations. PEMEX will use CENAGAS’ services when commercializing gas, which it will produce or import, in order to satisfy the national market. In addition, CENAGAS has become a member of the AMGN, so we now have an important interaction with the other natural gas shippers as a technical system operator and as a shipping player.

Q: Why is it important to have a technical system operator for the gas sector during an energy transition?

A: A common entity in Europe, the technical system operator aims at creating an efficient system and ensuring available supply, which entails having redundancy in the system and sufficient storage capacity. Today, we are facing an aggressive growth in demand resulting from the energy transition. The system operator will manage this growth in the most appropriate way so that the gas is made cheaper, safer, and more readily available in Mexico.

Q: How will CENAGAS make tenders attractive enough to lure players into the sector?

A: The fact that CENAGAS has to participate in preparing the tenders is a great opportunity for clarity in terms of conflict of interests, ultimately making the bids more attractive. We are thinking about implementing models that are similar to the ones CNH is using for the exploration and production rounds, such as establishing prequalifying criteria for companies and fostering close dialogue in order to establish the exact technical and financial conditions in the contracts. We will do this to attract companies and make the process more competitive. CENAGAS is also committed to finding the best international practices in tendering processes and bringing them to Mexico to create more trustworthiness among interested players, who will be able to participate in an environment of enhanced transparency.

Q: What are CENAGAS’ priorities for the short term, and what expectations does this entity have for its role as a technical system operator?

A: Our objective as a technical system operator is clear, and our first task is to coordinate our activities with the government and the private sector so that CENAGAS can react in a timely fashion, because the daily operations of the natural gas segment are filled with unexpected situations. We will then seek models to ensure the most affordable supply for energy generation and to cover the remaining industrial and residential demand, while reducing costs for compression and fuels as much as possible. This means evaluating all the combinations to ascertain the most efficient way to supply. We expect to conclude these projects by the end of the current administration. We might not achieve 100% coverage, but there will be significant advancements nonetheless, especially since the system will have the robustness and redundancies necessary to be more flexible, operative, and capable of fulfilling demand at all times.