STORY INLINE POST
There is still a great deal of talk about natural gas as an alternative vehicle fuel in Mexico as well as the actions necessary for an exponential boom for this market in our country. However, despite the many positive aspects that we will mention below, we also see some challenges that we must face.
For globally known reasons arising from the war between Russia and Ukraine, over the last year, the price of natural gas as a basic input has increased; however, despite this price increase, natural gas continues to offer attractive margins for investors to monetize their investments in infrastructure, allowing some options that do not exist for other fuels, such as the future purchase of the natural gas molecule (up to five years) which helps partially mitigate volatility and uncertainty in your projects.
In Mexico, the subsidy of up to 10 pesos per liter of gasoline and diesel applied by the federal government during the current year could exceed MX$350 billion ; however, even with these artificial prices on liquid fuels, with the use of NGVs (natural gas vehicles), savings of up to 50 percent on the final price of fuel are offered, whether for public or private vehicles.
The expansion of the national pipeline network (transport and distribution) during the last decade almost doubled the infrastructure for natural gas in Mexico, reaching new regions, especially in the west of the country, expanding coverage to other cities with high potential for consumption and with a transport capacity available from CFE that would facilitate its immediate supply.
Between the years 2020 to 2022, NGV stations operating also showed a similar behavior, going from 49 service points built during the last 20 years, to almost 100 service points projected by the end of this year, including 50 new NGV stations in 2023. In addition, there is the opportunity to expand the network of stations on trunk axes to serve emerging markets, such as trucks and buses on interstate routes, and within large cities with passenger transports with fleets dedicated to NGV. Remote regions without this service, such as Chiapas, Oaxaca, Guerrero and other areas, can be supplied with natural gas through virtual pipelines (transport by wheels), reaching a total coverage of our country.
For freight and passenger carriers there are currently offers of NGV tractors, buses, wagons, taxis and other vehicles, some manufactured in Mexico and which are backed by corresponding guarantees and which can be maintained by the growing network of specialized workshops throughout the country.
At the environmental level, it is also known that natural gas for vehicles is a transition fuel to future alternatives, such as electric vehicles or the use of hydrogen, with environmental benefits especially for large cities. However, these new technologies (electric and hydrogen) are far from mass implementation in our country. With NGV, we can immediately add Mexico to the international environmental commitments agreed by the federal government.
Moreover, NGV technology is accompanied by extensive and solid experience in design, construction, operation and technical support, in addition to being compliant with national and international standards under the supervision of third parties authorized by the federal authorities, in order to ensure safety and environmental protection. Thus, in partnership with leading international companies in NGV technology, there is high potential to develop the domestic industry, especially in the manufacturing of conversion kits, electronics, cylinders, instruments, machinery, equipment, vehicles, spare parts and other inputs, which would generate high social and economic benefits, including a reduction in conversion costs per vehicle.
Lack of Knowledge
With so much good news, what is holding back growth and what is needed for mass development?
Unfortunately, there is a lack of knowledge in our society and especially among many of the officials in the three levels of government regarding the benefits of natural gas as a vehicle fuel transition. This situation has not allowed it to be considered in federal or state programs that are environmentally strategic or for PEMEX, despite supporting the efforts to replace the importation of gasoline and diesel.
Some initiatives from entrepreneurs with a vision for NGV have faced delays in obtaining the corresponding federal approvals or permits, especially from ASEA, CRE or CENAGAS; in some cases, the rejection is due to requirements that do not conform to what is authorized in COFEMER or due to a discrepancy between the criteria for acceptance of new officials.
Similar cases occur at the state and municipal levels, where there is a disproportionate number of formalities and requirements that create delays and make investments more expensive. An example are the criteria or interpretations made by “Protección Civil,” where the request exceeds what is established in the current NOM, placing NGV as a very high-risk fuel, without knowing the safety benefits compared to other fuels.
For the implementation of NGV in some of the 13,248 gas and diesel stations that operate today in Mexico, we also face many governmental requirements and obstacles to include NGV as a new product within the installed infrastructure. To this can be added the objections of the neighbors of these facilities, which also causes a delay in the growth of this service. However, with will and some administrative and technical decisions at SENER, ASEA, CRE, states and municipalities, the development of natural gas vehicles could be facilitated through multimodal stations.
We are part of the solution and believe that the conditions exist to generate short-term progress for more than 60 million Mexicans. For the above, we only require a federal policy that positions NGV as a strategic transition fuel with benefits for the environment, economy and security, supported by an increased agility in the approval of permits and procedures of the different authorities at its three levels of government.
In support of the above, we request the implementation of a federal single window for natural gas projects, which would allow prioritizing permits for this fuel and reviewing compliance with Mexican standards of these projects, through well-defined and unified criteria that facilitate their interpretation by the responsible officials, accompanied by training and information workshops organized by the private sector.
In addition, and to ensure continuous improvement, we must work on the revision and updating of some current federal technical standards and eliminate overregulation implemented by some local governments. On certain occasions, we have discarded or delayed projects due to municipal or state restrictions resulting from particular interests or simple ignorance of the benefits of this fuel.
We ask the federal government to allocate resources for a national program that facilitates the financing of NGV conversions or the purchase of new NGV vehicles, determining schemes with preferential rates and tax benefits that can trigger investment in this item, increasing the use of NGV in public transport. As complementary actions, we request to evaluate and structure together with SENER, CENAGAS, PEMEX and natural gas distributors throughout the country, a special program for five years that will allow preferential discounts on NGV consumption rates to support their development.
Finally, as a natural gas vehicle sector, we must redouble efforts to increase the number of NGV vehicles by implementing a national NGV conversion plan that will allow the installation of NGV equipment in the current 50 million gasoline and diesel vehicles, combined with new factory vehicles and work with specialized conversion workshops on the continuous mandatory annual review of converted vehicles, without neglecting the imminent need to build new centers for hydrostatic cylinder testing.
As a complement to the above, we must review the financing model by expanding to new schemes that eliminate the dependence of the “collection by tanker" (payment of the conversion by gas refills), which has restricted the growth of the market, accompanied by mas marketing and training campaigns that promote the use of NGV, coupled with promotional campaigns by the energy ministries and clusters of the various states where NGV is available, as well as the implementation of companies specialized in the commercialization of NGV to increase the number of users and their consumption.
As companies in the natural gas vehicle sector, we will continue to promote an applied, orderly, compliant sector and with enthusiasm and interest to continue building for the benefit of all Mexicans. Merry Christmas and a prosperous 2023.