CFE Drives Private Sector Growth

“Outside investment in Mexican oil and gas projects currently stands at zero because of the state run monopoly in the industry, except for small areas like gas transportation, which is open to private investment,” explains Thomas Mueller-Gastell of Ritch Mueller, a law firm specialized in project financing. “The gas system as a whole requires a lot of investment, and this is something that is currently being made very clear by the Mexican authorities. CFE is one of the main drivers in this activity, as the country’s largest consumer of natural gas. In some ways, they have actively bypassed Pemex Gas in this regard, driven by their need for gas supply in remote regions. They have launched several tenders for such infrastructure, and carried them o with great success. Additionally, LNG has taken o in a big way and we have seen private investment first at Altamira, and later at Manzanillo and Costa Azul in Baja California.”

Mueller-Gastell believes that demand from the CFE has acted as a strong driver for foreign investment in the gas sector, as having the government at the end of the pipeline as the otaker makes projects feasible financially and bankable. Important projects that have already been awarded include the Chihuahua pipeline, whose construction work is supposed to be finished in mid-2013 and the Morelos pipeline, where first phase commercial operations are planned to start in October 2012, with the Spanish company Elecnor as the contract’s winner. There are further gas infrastructure projects in the pipeline, like the Los Ramones, the Northwest and the Zacatecas pipelines. Another project, The Manzanillo–Guadalajara pipeline, is already completed and the pipeline provides gas to the CFE’s Manzanillo I plant. Projects recently awarded include the US$500 million, 235km expansion that TransCanada will be adding to its Tamazunchale pipeline, and the US$500 million Chihuahua Corridor pipeline to be built and operated by Fermaca. All of these projects show the appetite for investment in the oil and gas industry, and the potential for growing activity such as this, but also the fact that it is the CFE and not Pemex Gas that is driving these projects.

Héctor Moreira Rodríguez, one of the professional members of the Pemex board, explains that the new model for developing pipelines overcomes the vicious circle of supply and demand, which had previously stalled the building of pipeline infrastructure because of the need to have both customers and supply at the same time, by distributing costs between all stakeholders. He believes that if possible, the NOC should stay out of pipeline activity altogether, including eventually owning and operating the gas pipeline network: “Pemex needs to be run more as a business, and there are better places where their money could be spent than in pipelines, from upgrading refineries to increasing exploration and production. The pipeline business can be left to companies other than Pemex.”