Natural Gas Industry PrioritiesWed, 01/22/2014 - 13:39
Q: What are your perspectives on the role of natural gas in Mexico’s energy future?
LVS: Natural gas production has declined for the last four or five years and shortages have led to increased imports from the US. We currently import over 1bcf/d from the US, which represents about 17% of Mexico’s consumption, while we used to only import about 300-400mcf/d. The Energy Reform emphasizes that Mexico’s production is going to increase by 2015. SENER expects that Mexico will be able to export natural gas by 2020, after the start of deepwater and shale gas production.
Q: What are the main challenges that the import of natural gas from the US represents for the gas distribution market?
LVS: This starts with the lack of pipelines. Mexico has seen discussion about pipeline development for the last ten to 15 years, but not much has happened. A minimal number of pipelines has been built by both the public and private sector in the last five years, and those under construction right now will not be enough to satisfy the country’s needs. This lack of pipeline infrastructure has already been the case for the last 20 years. Back then, we used to talk about opening up the market to private sector investment in pipeline construction, and we are still talking about that today.
Q: To what degree will the Energy Reform address issues that AMGN has been lobbying for, such as the elimination of the LPG subsidy?
LVS: The LPG subsidy is going to disappear in the near future. The Energy Reform and the Constitutional change met a large part of our expectations. Other interesting changes included granting PEMEX operational and financial autonomy. SHCP will no longer need to approve PEMEX’s investments, which is a triumph in itself. The creation of the Mexican Oil Fund for Stabilization and Development is also a significant advancement. We believe all of these elements will benefit the gas distribution industry.
Q: How has the lack of pipeline infrastructure changed the natural gas distribution market?
LVS: The market cannot wait for the pipeline construction process to be completed. This is why compressed natural gas (CNG) was introduced despite the additional expense it entails. Compressed natural gas distribution is a limited and temporary alternative, the companies involved know this and they are merely waiting for the pipelines to be built. But this way, they can at least participate in the market, find industrial clients, and, by the time the pipeline is built, they will be familiar with the structure of the industry.
AHA: If a company has enough CNG infrastructure, once a pipeline is constructed it can use its experience to develop the distribution for domestic and commercial use, as well as for vehicles.
Q: What are the priorities on AMGN’s agenda to support the industry in fulfilling its goals?
LVS: It is very important for Mexico to increase the production of natural gas, the expand its pipeline infrastructure, and use CNG for vehicles. In line with these objectives, we expect more and more pipelines to be built and to secure more distribution permits from CRE for new regions
AHA: In coordination with SEMARNAT, we must lobby to promote the use of CNG for all public and load transportation vehicles. We first want to build CNG stations for supplying this type of gas in the area between Monterrey, Saltillo, Reynosa, and Laredo. However, before we move ahead with our plans, we need to know what PEMEX is going to do in terms of production of conventional oil, shale gas, and shale oil.