Gas Station Constructor Bets on Low Natural Gas PriceBy Peter Appleby | Fri, 10/16/2020 - 10:03
Q: How has Grupo DIDSA’s CNG and NGV service offering evolved in the last 12 months?
A: Grupo DIDSA has focused for the last 30 years on the engineering and construction as well as the operation of natural gas pipelines. We are certified by the Regulatory Energy Commission (CRE) as natural gas operators, so we can operate natural gas pipeline systems for a variety of clients in Mexico. However, now we work on the full cycle related to natural gas, which includes ownership and O&M. We understand the engineering and construction sides well, which brings us into the CAPEX side of things. We construct, develop and operate our own stations in northern Mexico, a market we know very well. Because of our background, it was not a great leap for us to move into ownership and O&M. We already managed natural gas (construction and operation). Now, we also sell it: compressed.
The decision to manage and operate retail sites has delivered some challenges, however. These include the different range of pressures that we now deal with. We were used to working with 20 to 40 BARs, but in retail stations, we have to work up to 250 BARs of pressure. We have learned new ways of understanding and have applied various protocols in overcoming these challenges.
Q: Why did Grupo DIDSA decide to move into ownership and operation of natural gas stations?
A: Grupo DIDSA considered the changes in the industry’s landscape and our experience. We will continue to work as constructors within the natural gas sector, in which we have more than 40 years’ experience, as well as in the midstream. However, Mexico’s midstream is a rapidly shrinking market due to the government’s actions. On the construction side, we will work nationwide and are in talks with major transporters and distributors of natural gas in Mexico and the US, where is continuously growing.
Ownership and operation of natural gas stations was a great opportunity. We have a natural gas station in the state of Coahuila, which will be the state’s first. This will be a co-branded station with Naturgy: our station with the Naturgy brand name. This was a long-term project that was 4 years in the making, but we are delighted to have finished the job and to be able to bring natural gas to Coahuila.
Our intentions for the natural gas station market do not end there. The next 24 to 30 months will be very busy. We are planning to construct between 10 and 14 stations. This is a large-scale project for us. While throughout the 1980s and ‘90s there was an upsurge in the number of natural gas stations in many Latin American countries, this was not the case in Mexico. However, with the reasonable prices that we are seeing in Mexico now, we expect natural gas use to expand here.
Q: Who is Grupo DIDSA targeting with natural gas fuel?
A: Over the last few years, Grupo DIDSA has focused on determining the potential clients for our natural gas stations. The traditional customer base included taxi, truck and bus drivers. However, in the last six to eight months, we have seen a dramatic change. The country’s growing logistics sector, from areas like El Bajio, has grown in importance. The automotive industry’s need to transport its products from Mexico to the US offers us a great opportunity because around 60 percent of those companies’ costs come from transport and the consumption of diesel. The trailers that move the industry’s products are far more cost-efficient when running on natural gas. After two months of opening our station in Coahuila, we were catering to trailers that transport vehicles. Due to the amount of time that these drivers spend on the road, they appreciate the fuel savings. Currently, our station sells a liter of natural gas for around 10 pesos. We expect automotive companies’ interest to grow even further now, considering the price pressures we are seeing. Grupo DIDSA and natural gas are a real solution to this problem.
Our competitors are mainly focusing on taxi drivers. This is the entire focus of their business. For us, as we open our first station, we already can see new opportunities. That is why in the next 24 to 30 months we expect to have up to 14 stations around central and northern Mexico.
There are many reasons that Grupo DIDSA has chosen to begin its station network in Mexico. Unlike in Europe, which imports LNG, Mexico has the world’s largest natural gas market on its doorstep. Monterrey is the city in Latin America with the highest availability of natural gas. It would be unfair to compare Mexico City against Monterrey. Not only is Mexico City less inviting for natural gas, but it also lacks the necessary infrastructure and dealing with the various municipalities around the capital can be difficult. Similarly, the penetration of natural gas in southern Mexico is weaker than in the north, given our proximity to the US. This is why it is easier for us to begin our gas station network in the north.
Q: Could oil’s recent volatility, and CNH’s support of natural gas, become a reason for Mexico to include a greater amount of natural gas in the energy mix?
A: No, we do not believe this will happen. This administration will be based on oil and it is unlikely that natural gas will enter the agenda. There will not be any budget allocated to natural gas. This is extremely unfortunate because I believe that natural gas can save this country. It is an incredible resource that is not being used.
The value of natural gas is evident when you look at the north of Mexico. Being so close to the border, we see the value that natural gas has brought to Texas and the United States, which is the cheapest market in the world. But that has cost billions to develop, so it is much cheaper to take the gas, which costs between US$1.80 and US$1.60 per MMBtu. There is little incentive for Mexico to invest in natural gas considering the current climate.
Grupo DIDSA is integrated by companies dedicated to the development of infrastructure, with broad experience in the construction, operation and maintenance of pipelines and engineering development, among other activities.