David Madero
Director General
National Center for Natural Gas Control (CENAGAS)
View from the Top

Welcoming Private Retailers to Sistrangas

Wed, 02/22/2017 - 14:58

Q: How has CENAGAS evolved in the wake of the Energy Reform?

A: In January 2016 we received PEMEX’s natural gas storage and transportation infrastructure as a result of the Energy Reform’s mandate. The transfer radically changed CENAGAS’ daily operations. The transportation fees of the National Natural Gas Transportation and Storage System (SISTRANGAS) began to flow as well as the associated payment responsibilities. As these responsibilities evolved we developed and improved our operational skills, strengthening our coordination with PEMEX and CFE and closely following CRE’s regulatory updates. Early termination of contracts such as financing, legal and compliance services have allowed us to grow while we continue collaborating with PEMEX on the operation of pipelines. In October 2016 we launched the first open season for reserving capacity in SISTRANGAS, which illustrates our evolution as the system’s technical operator, moving a step forward toward a stronger transportation model.

Q: What were the main challenges to successfully launch the open-season process?

A: The first step was for CRE to assign PEMEX and CFE their corresponding capacity in the national pipeline system, a task on which we collaborated. The productive enterprises of the state were assigned 40 percent of the total capacity for their exclusive use. For PEMEX this mainly means to use it for refining and industrial transformation processes, while CFE will use it for power generation. Neither company can use that capacity for commercial purposes. Private companies will get the remaining 60 percent of the pipelines’ capacity, either for commercialization or direct usage. We have to comply with assigning the capacity agreed in previous contracts, which in the end leaves us with around 2 billion cfd to assign in the open season to the remaining interested parties.

Q: What are the key hurdles for processing and assigning the upcoming requests?

A: Companies are required to disclose the injection and extraction sites to determine the cost overrun parameter (β) they are willing to pay to ensure capacity. We are considering indivisible routes. The β parameter will allow us to determine the interest in each route, order the applications and fix the capacity we can allocate to each route according to our SISTRANGAS simulation system, as well as the optimal price to assign each tranche. We designed a second-price system assignation where interested participants are required to provide a positive β. If a particular route is not saturated the price will be zero. If the route is saturated all participants will pay the same β equivalent to the first cfd we are unable to allocate to the route. We will allow an extra week in the process to address any difficulty customers may have in submitting their applications.

Q: Which companies will benefit the most from this process?

A: CENAGAS’ main customers have traditionally been CFE and PEMEX. But now some additional retailers are expected to participate as well as companies that do not wish to depend on a retailing company. Natural gas commercialization is being liberalized in Mexico and now we have over 20 CRE permits to do so. Some of these permit-holders should be willing to reserve capacity in the natural gas pipeline system. The interest of companies to sell gas and acquire capacity in the system from CENAGAS should become very clear.

Q: What are CENAGAS’ goals for the upcoming years?

A: CENAGAS’ goal is to be among the Top 25 transporters in terms of efficiency, efficacy and safety, hopefully by 2025. It will be a challenge. We will be competing against the highest international standards. The next three years will be a phase of constant evolution. By 2018 we expect to have a consolidated company and by 2020 we are expecting to reduce operating costs and consolidate our role as a technical operator with clear responsibilities and functions.