LNG Exports, Yucatan Demand Advance Natural Gas: TC Energy

Demand for natural gas in Mexico’s Yucatan Peninsula and the potential to export liquefied natural gas (LNG) offer great potential to grow TC Energy’s natural gas network in Mexico.

Stan Chapman, President of US and Mexico for Natural Gas Pipelines of TC Energy, explained there are specific opportunities in these areas for the country’s wider oil and gas industry during a conference call on May 7. 

TC Energy, formerly known as TransCanada, operates with its Mexican arm named TC Energía. This business unit represents around five percent of the TC corporation, said Robert Jones, President of TC Energía in MOGR 2019/2020. “We are the largest Canadian investor in the country,” Jones underlined the importance of the company’s role in the country.

The 886 MMcf/d, 420 km Villa de Reyes pipeline is still under construction, as the global pandemic slowed down the administrative processes needed to advance the project. The further Tuxpan-Tula segment has been slowed down by the indigenous consultation process led by SENER. “Post that, I think that there is a potential need for additional demand into the Southeast portion of Mexico into the Yucatan Peninsula and we are somewhat uniquely situated to potentially serve that via an extension of our Sur de Texas pipeline,” Chapman said in the call. He added that the west coast provided opportunity for LNG exports, although “probably on a little bit longer timeline,”  pointing out that for the next years an investment from the company of around US$83 million would not be unreasonable.

Analysts and industry players agree with Chapman on the potential LNG exports and the Yucatan areas provide. Even though regulatory uncertainty and government measures are complicating Mexico’s energy investment environment, Partner at Von Wobeser y Sierra Edmond Grieger confirms that the peninsula remains appealing: “There is still interest in greenfield project acquisition in the Yucatan peninsula,” he said in an MBN interview. Yucatan faces challenges in its energy supply because it operates on a somewhat isolated model. “One transmission tie in Yucatán operated above 90 percent of its operational capacity 50 percent of the time in 2020,” Francisco Zurita, Director of Business Intelligence, Northland Power Energía told MBN. More access to natural gas locally could alleviate some of these issues.

In IEnova’s earning call, CEO Tania Ortiz explained that the company’s Energía Costa Azul liquefied natural gas (LNG) project remained at the top of its priorities. President Andrés Manuel López Obrador pondered the option to grant private companies permits to sell LNG to Asia, attempting to resolve oversupply of natural gas for CFE.  “There is surplus gas contracted and we have to find a way to use it because these are contracts that were signed and we have to respect them," said López Obrador in 2020. Whereas IEnova’s project carries the torch in these efforts, other private companies are looking to participate in this newly evolved market niche as well.