Emilio Lozoya
Director General
PEMEX
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View from the Top

PEMEX Approaching the Wholesale Electricity Market

Wed, 02/24/2016 - 13:29

Q: How do you envision the role of PEMEX in the Mexican electricity market?

A: Renewable energies are increasing in prevalence, so in this context, natural gas will play a key role in the energy transition. The National Gas Strategy is centered on the construction of new transportation infrastructure to increase coverage, the elimination of bottlenecks in existing systems, and the increased importation capacity at the US border. An important step in the energy transition consists of capitalizing on the current natural gas availability as a fuel to achieving a sustainable energy sector.

PEMEX intends to undergo a transition by shifting from fuel-based to natural gas generation in its refineries, gas processing facilities, and petrochemical complexes by implementing cogeneration plants and obtaining an estimated potential of 5,000MW of clean and efficient electricity. A first phase will focus on the Cactus Gas Processing Complex, while subsequent endeavors will work on the Tula, Cadereyta, and Salina Cruz refineries, totaling an estimated capacity of 2,500MW. The goal is to take advantage of the company’s cogeneration potential, which is estimated at 5,000MW, and increase efficiency and reliability in PEMEX’s productive processes.

With this in mind, PEMEX entered a new sector through the creation of PEMEX Cogeneration and Services. As a result, the company expects to increase its operational efficiency and reliability, as well as to participate in the new wholesale electricity market, becoming the second largest electricity generator in the country in the next five years.

Q: How important are electricity generation and natural gas transportation in PEMEX’s portfolio?

A: PEMEX’s productive processes require large amounts of electricity and vapor, so it is crucial to implement cogeneration systems as a key practice for improving efficiency. Cogeneration systems allow both the reduction in power generation costs by approximately 30% due to the recovery factor in thermal energy (vapor) for productive processes, as well as the economic benefits brought about by clean energy. The simultaneous generation of electricity and thermal energy means the overall efficiency of cogeneration systems exceeds that of using other electricity and thermal generation technologies individually. Conventional power generation systems experience efficiency rates of 30-40%, while cogeneration systems achieve levels of 80-85%. PEMEX has an estimated cogeneration potential of 5,000MW, therefore the company can become self-sufficient in terms of electricity and vapor (5,000 ton/h).

Q: In your opinion, why is PEMEX well-positioned to tackle the electricity market?

A: The high demand for vapor in PEMEX facilities creates the opportunity for a new business line within the company, especially considering the stringent requirements for thermal energy that facilitate the development of largescale cogeneration projects. Cogeneration provides a reduction in losses associated with the transmission and distribution network, as well as contributing to the stability and reliability of the National Electricity System, providing voltage control, reserve capacity during contingencies, cold start capabilities, and reducing congestion in the grid. When considering the substantial availability of PEMEX facilities, electricity from cogeneration plants ensures the supply and dispatch to the National Electricity System. The Energy Reform provides PEMEX the opportunity to participate in the wholesale electricity market by selling electricity surplus resulting from cogeneration activities, while also benefiting from operational, environmental, and economic benefits. On another note, vapor is essential in the operations of PEMEX plants, and its supply increases efficiency in the facilities and guarantees the dispatch of low-cost electricity 24 hours a day.

Q: What are PEMEX’s ambitions in the electricity generation sector?

A: Through its cogeneration division, PEMEX seeks to maximize value, satisfying the company’s energy demand and guaranteeing a reliable, efficient, and secure supply that will allow it to strengthen the sector’s competitiveness and participate in the wholesale electricity market. It is estimated that PEMEX can seize 47% of the country’s cogeneration potential, and PEMEX Cogeneration and Services is expected to become a socially responsible and competitive player in the electricity sector.

PEMEX will showcase high levels of innovation that will increase the value of its assets and contribute to the development of the sector by offering clean and affordable energy. This will permit us to position ourselves as the second largest electricity producer and take advantage of strategic alliances with leading companies in order to push cogeneration projects while mitigating risks for PEMEX.

NEW PEMEX STRUCTURE