Potential Open Season in Cancun

Q: How does ENGIE match its natural gas business in Mexico with its production ambitions for clean energy?

A: We have three business lines in Mexico, one of which is power production. Cogeneration plants have been the core of our power-generation business up to now. ENGIE has around 311MW of cogeneration capacity installed. In addition to electricity we offer steam to our clients and inject the surplus power to the grid. Now we are looking to expand our power-production capacity with more cogeneration projects, particularly for clients with high thermal demand, including mini-scale and large-scale facilities and new solar and wind-energy projects. Our goal is to produce at least 25 percent of our energy from renewable sources by 2020, which is in line with ENGIE’s vision and the goals set by the Mexican government regarding clean-energy generation.

Q: How does the company plan to expand its natural gas transportation and distribution capabilities?

A: Natural gas transportation is the second axis of our operations in Mexico with 1,300km of pipelines already under operation, including the Mayakan pipeline in Yucatan, the Bajio pipeline in Mexico’s central region and a new pipeline located south of the second phase of Los Ramones, near Guanajuato. ENGIE is the second-largest natural gas pipeline operator and the first distributor in Europe and we have used that experience to expand our business in Mexico and provide the services our customers require. Natural gas distribution is the third pillar of our Mexican business. We are already the second largest natural gas distributor but we want to double our local client base by 2020. We now have six natural gas distribution companies in different states, including the State of Mexico, Puebla, Tlaxcala, Queretaro, Jalisco and two in Tamaulipas. The availability of cheap natural gas from the US and Mexico’s goal to expand the national natural gas network are the main drivers behind our plan. Besides expanding our reach, we want to offer our clients’ integral services beyond natural gas supply like minicogeneration for industrial applications. We are looking to integrate energy-efficiency strategies to help our clients optimize consumption. We are also looking at alternative uses of natural gas to complement our distribution and transportation activities in Mexico. Compressed Natural Gas (CNG) is one of the means to reach areas located 200-300km from a natural gas pipeline. We manage this business in a joint venture with Virtual Pipelines Mexico, which has great expertise in the natural gas compression segment. Another business we are analyzing is Vehicular Natural Gas (NGV).

Q: Where do you expect demand for natural gas services to flourish?

A: We expect to see demand increase for our natural gas distribution services in the regions where we are already operating because natural gas demand usually grows around existing pipelines. We already operate 10,500km of pipelines in our distribution business but we need to add 5,250km to double our clients, which is among our ambitions for 2020. We also see great potential in the Cancun area, which lacks a steady natural gas supply. There is one pipeline already in the region but it only gets to Valladolid in Yucatan, leaving customers in Cancun without direct access. We are planning to deliver CNG at first but we see expanding our natural gas network as a potential solution for the future. We are analyzing the possibility of organizing an open season in Cancun aligned with the new regulatory framework, which allows us to ask about client interest in reserving capacity in the system. If enough interest is perceived at the open season, we can expand our Mayakan pipeline all the way to Cancun.