David Madero Suárez
Director General
CENAGAS
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View from the Top

Midstream Transfers to New System Operator

Wed, 01/21/2015 - 10:25

Q: How would you define the precise role CENAGAS will play in the midstream sector?

A: CENAGAS will take over around 9,000km of pipelines from PEMEX, along with its rights and obligations. We will continue to run these operations through PEMEX for up to two years in order to make the transition as smooth as possible. For this purpose, we have signed a very broad operation and management contract. We are carrying out this process with favorable termination clauses for both parties, so that CENAGAS can decide when to separate from PEMEX and do things by itself. In its role as a technical system operator, CENAGAS will be working on the operation and maintenance of the pipeline system while improving its technical capabilities. This particular model has not been seen in Mexico before, which means that everything has to be created from scratch. We are also in charge of laying out medium-term plans for the expansion of the pipeline and storage system, and running the bidding processes for major pipeline projects. The expansion of the pipeline system is one of the opportunities that will open up due to the Energy Reform, with the idea of CENAGAS having control to carefully plan the system and make it as secure as possible. We want to ensure gas security for the entire country and have enough transportation capacity to reach every point in the system at all times. We will be guiding those bidding processes and we will learn from CNH’s experience, while bringing the best international practices into Mexico.

As the technical system operator, CENAGAS will act centrally, finding the best way to interact with the entire industry. We will decide if we want to maintain all operations centralized, managing all the pipelines from the same facility, or if we want to task other operators with carrying out our decisions. We have to find the best option for the industry, which starts with designing the proper contingency plans and evolves to the best, most efficient system of operation. CENAGAS will also work with other transportation companies to ensure the network remains as safe and efficient as possible. In addition, CENAGAS will put up for bidding the most strategic and socially meaningful projects considered by SENER, which will happen in 2016. This is a huge responsibility since big projects can represent an investment between US$500 million and US$2 billion.

Q: Which entities will have the most influence on the operations of CENAGAS, and how will you engage with other players in the industry?

A: Every CENAGAS activity will be monitored by CRE and we expect a proactive, disciplined, and positive relationship between us both . We want to start by gaining control of accounting and finances before moving on to strengthening the relationship with CRE in other ways. As for CENAGAS’ relationship with other parties, we plan on joining AMGN as soon as possible, as this will enable us to directly interact with the members of this industry association.

Q: What will be the main drivers in this new business environment?

A: The new environment will be focused on cost and controlled by innovation. There have been certain breakthroughs in some parts of the industry, leading us to seek to enhance pipeline integrity. CENAGAS will be carrying out an overall inspection of the network and real estate we are receiving. Additionally, we will be reviewing the decision-making processes regarding the maintenance of the whole system. We believe that PEMEX has done a great job, particularly in natural gas security, but we want to take this a step further. We are setting higher benchmarks and we will continue to ensure that the company remains economically viable for the Mexican public sector. As a result, our focus will be on our inspection process. CENAGAS is defining the integrity standards and third parties will be in charge of inspecting our pipelines.

Q: What are CENAGAS’ strategic priorities, aside from the 14 pipeline projects currently being developed?

A: The most strategic pipelines will be defined by SENER. While we will certainly be participating in the planning process, we will then be looking at these pipelines and analyzing them from a technical point of view. CENAGAS will operate as an entity that has information on the entire system, that has a view of how the system should work, and that knows where the bottlenecks and opportunities are. SENER will be the policy-maker in charge of defining the entire strategy while we retain technical responsibility for the natural gas network.