Ready to Move on Crucial Natural Gas Infrastructure ProjectsBy Cas Biekmann | Thu, 07/30/2020 - 13:30
Q: How was Mirage Energy founded, and what is your experience concerning natural gas in Mexico?
A: I founded Mirage Energy around five years ago as a special purpose vehicle. We did a reverse-merger into a public company primarily to execute projects we had outlined, which are now in the process of development. Our storage project was to be developed 26 years ago, with a company called Tidelands Oil & Gas. We had all of our permits back then, but the necessary energy reforms had not been passed. We shelved the project, but came back to it after the Energy Reform was enacted. Our projects are structured to be mutually beneficial. The way our projects are designed, the Mexican government makes a dollar every time we do. It is a 50/50 split, with no hidden agendas.
The first project I worked on in Mexico was 27 years ago. The project implemented and expedited the cross-border permitting process for pipelines. We basically took a three-year process and turned it into a six-month process, which is how all cross-border pipelines are permitted now. I also built the first pipeline under that process at Eagle Pass and Piedras Negras to service the industrial complex at Piedras Negras and the new Modelo brewery. This was achieved with help from CONAGAS.
I think Mexico is a fantastic place to develop infrastructure projects. I have seen four government administrations pass by and there are always political shifts. But in the end, it always seems to work out as long as the project itself is sound. In the end, it is truly about the Mexican people. I have had very good experiences working with PEMEX and CRE.
Q: How is the company’s Isthmus corridor project moving along and what are its main characteristics?
A: We are in the process of getting approvals. We have already done all the necessary inspections and have had boots on the ground to inspect the project ourselves. To lay out all the pieces, there is a 30-inch and a 48-inch crude line running across the Isthmus. This is owned and operated by PEMEX. It does need some maintenance, to say the least. Our project is to rehabilitate those lines, putting in new turbine pumps, constructing new control rooms and measuring systems.
Our project really starts at the Port of Pajaritos in Coatzacoalcos. We will have two monobuoys offshore to accommodate ultra-large crude carrier (ULCCs)/supertankers carrying up to 3.5 million barrels of crude. In the actual port, we will have four docking stations, each with a capacity for a 500,000-barrel tanker, that tie into the 30-inch and 48-inch lines. First, we will rehabilitate the 30-inch crude line and then hand it over to PEMEX for its use. As it is moving around 300,000 barrels per day across the corridor, this is significant. We will keep the 48-inch line for our own use. We will have 900,000 barrels of storage capacity at the Port of Pajaritos. In Salina Cruz, we plan to have 2 million barrels of storage. These are already existing tanks that we are refurbishing. We will have two monobuoys on the Pacific side of Salina Cruz as well. This allows us to bring in ULCC vessels or tankers that come from the US coast. ULCCs are usually loaded and then travel to Asia. With our enhancements, the process saves 36 days in true shipping time. This means a ship comes to the Gulf of Mexico on the Mexican side and offloads. We then pump the crude across to the Pacific side of Salina Cruz and load it either into tankers or ULCCs.
We will develop the project with Arendal, and will consider local contractors. Mirage Energy tries to use solely Mexican contractors when possible, as long as the quality through our insurance companies is good, for which we use IBTX. This is a requirement to our US$4 billion financing. We think that the proximity of Mexican contractors gives them a competitive advantage. Furthermore, we can help boost the local economy while achieving savings ourselves.
Q: How is the company working to convince the government of the need for Mirage’s 786bcf storage project?
A: I would argue that storage is essential for the Mexican government, whether it prioritizes it or not. The fact is that if a natural gas interruption occurred regarding gas coming in from the US, it would become a national disaster. If such a disruption occurs, Mexico has around three to four days of linepack “stored” in its pipelines and LNG facilities. After this, everything stops. With our storage facility, we can provide up to six months of natural gas supply after it has been fully developed. This will take some time, however. The six-month time period should be long enough to correct any issues that may arise, which would buy the government time and security. However, we are not developing this only as a strategic reserve, but as a commercial operation of which industrial players can benefit. A power producer or automotive manufacturer would have the ability to buy molecules and store them at a cheaper price and use them for cheaper energy when prices increase. With this, you avoid curtailing industrial players. For instance, it is a disaster when a steel mill has to stop its operation because it lacks gas.
Q: What will the company’s integral pipeline project look like?
A: Concerning pipelines, a 42-inch pipeline is to be built. The line goes from the Agua Dulce-Banquette Hub toward Progreso, then crosses the border 27 miles into Mexico. After this, the pipeline travels west to Station 19. We are building a parallel line from this station down to Los Ramonas. The line will also feed the storage facility. We will have a 50,000HP compression set there, as well as 25 injectors. With that, we can inject 0.5bcf of gas per day for storage purposes. Regarding the storage, we are working on a deal to rehabilitate the San Fernando-Cactus pipeline. This was originally built to bring gas from the Bay of Campeche up north and designed to travel into the US. Nevertheless, that piece was never built because the deal fell apart. It is a single-direction right now as there is no gas coming from Campeche. We will refurbish the pipeline, with new compression, new meter stations and instrumentation to make it bi-directional again. The line will travel to Nuevo PEMEX. We have an interconnection agreement with Whitewater Whistler here. All the gas will come from the Permian basin, considered the cheapest gas on the continent.
Q: How is Mirage Energy preparing to sign deals with private players and state governments, such as Puebla’s Ministry of Energy?
A: We have signed a deal with the Ministry of Energy of Puebla. The goal is to develop a line to feed an industrial complex that they are building. The line will be fed with the gas coming from the San Fernando-Cactus line. The project has been somewhat delayed due to COVID-19, but soon we will resume work. It appears that we can use the right of way that had been established for the highway. We have spoken to numerous enthusiastic industrial consumers as well. In fact, in almost every city we pass with the pipelines on the eastern coast of Mexico, industrial players are anxious to see them built. We receive calls on a daily basis from interested potential customers. This is because at current prices, we can deliver natural gas, including molecules, from the Permian basin to Yucatan for half the price that players are being charged now. This would represent significant savings and a boom for the industrial complexes in the area. It will even attract new manufacturing, which would propel much needed employment.
Q: What would the timeline look like for Mirage Energy’s projects once they get the green light via permits?
A: From the time we get the permits for our pipelines and storage facility, we can be operational in 18 months. The Isthmus Corridor project will take us six to seven months to transport the first actual product across the corridor. This includes the rehabilitation of the docks, tankage, monobuoys and existing facilities. The rehabilitation of the San Fernando-Cactus pipeline should take 12 to 18 months.
Texas-based Mirage Energy is focused on the transportation of natural gas between the US and Mexico. It signed a US$4 billion debt facility to develop natural gas pipelines, underground natural gas storage and the Isthmus Corridor Project.