Natural Gas Market Ready for Expansion

Since 1995, a series of reforms have shaped the Mexican natural gas sector, allowing for private investment to progressively come into play. One of the results of this was the right for private companies to construct and operate pipelines, which has unlocked additional natural gas capacity for Mexico. Although such reforms allowed investment in the transportation, storage, distribution, and commercialization of natural gas, they did not open up exploration and production, which were activities reserved for PEMEX. Due to the lower profitability margins in the production of natural gas compared to oil, PEMEX did not invest as was needed to meet domestic demand for this commodity, leading Mexico to import almost 30% of its total natural gas consumption. It was only until the passing of the Energy Reform that Mexico finally opened its doors to private investment in the exploration and production of natural gas. As a result, Ricardo Ortiz, CEO of Compañía Mexicana de Gas, believes that new infrastructure projects and private investment in natural gas exploration and production will lead to a considerable increase in the supply of natural gas. On the one hand, the construction of the Los Ramones pipeline, which will extend from Agua Dulce, Texas, to Apaseo el Alto, Guanajuato, will increase natural gas imports from the US. On the other hand, Ortiz expects PEMEX and the private sector to increase natural gas production in Mexico.

This naturally opens up new prospects for Mexican companies already working in the distribution of natural gas, as is the case for Monterrey-based Compañía Mexicana de Gas, a natural gas distribution company owned by Grupo Diavaz. “As of today, we are growing at a rate of 13-15,000 new clients per year in the residential market,” shares Ortiz. “At the same time, we are also paying close attention to the new industries that are being set up in Monterrey’s metropolitan area. By 2018, we aim to reach 170,000 clients.” For Compañía Mexicana de Gas, the primordial objective is to maintain its current growth. “We will be increasing our infrastructure capabilities in order to guarantee our natural gas distribution reliability and cater to the city’s future growth. To effectively spot the opportunities and tap into new markets, the company aims to be in direct communication with industry leaders and municipalities. On a larger scale, it will work with the authorities to promote Monterrey, and Nuevo Leon in general, as an attractive investment destination for energy intensive industries,” says Ortiz. Even though Compañía Mexicana de Gas is already very active in natural gas distribution in Monterrey, the company is interested in supplying natural gas to energy consumers looking to set up operations within its distribution zone. Expanding into other distribution areas either via pipeline construction or natural gas transportation is also among its targets over the coming years. By doing this, Ortiz is confident that his company will be able to reach new clients, especially in cities that do not have natural gas or have a natural gas network that is partially developed. Compressed natural gas (CNG) presents another interesting opportunity for natural gas distribution companies. “We are looking to take on CNG opportunities through our sister company, Neomexicana, in areas where natural gas is still unavailable. We know that there are significant possibilities to venture into this market and we feel that this business line could complement the overall portfolio of Compañía Mexicana de Gas,” shares Ortiz. “We consider that CNG for vehicle use will be developed extensively in Mexico over the coming years and we want to tap into these opportunities accordingly. Neomexicana’s valuable experience as the first company in Mexico to obtain the GNC transport permission to deliver natural gas to final customers will stand it in good stead for this expansion.” Moreover, the company has the ambition to become a power generator in cogeneration and combined cycle projects. “It is possible that in a few years, we may have a power station and a business parkthat gets its electricity from us. Power generation could be another business opportunity for us,” says Ortiz.

The objectives of Compañía Mexicana de Gas are in line with the state of Nuevo Leon’s plans for becoming an energy hub. “The state of Nuevo Leon has created a division specialized in energy in order to meet its objective of becoming an energy hub. We will be collaborating directly with this division to make it happen,” Ortiz explains. “Moreover, we are advising the Secretariat of Economic Development, as it receives requests from companies wanting to set up operations here and work towards successfully making use of natural gas in the region. We are aware that Compañía Mexicana de Gas is not the only company eyeing the opening of the natural gas sector, and we expect competition to increase in the future as distribution areas cease to have exclusive ownership. Compañía Mexicana de Gas is prepared for the new competitive environment, as we have always treated our residential and industrial clients with strict professionalism in order to guarantee them total satisfaction,” Ortiz confirms.