Roadrunner´s Boost to Pipeline Pace

With falling oil and gas prices globally, Texas’ Permian Basin seems to be the only area to emerge from the downturn relatively unscathed, with rising a production. This can be witnessed through OneOk’s new partnership with Fermaca to provide the Roadrunner natural gas pipeline, running from Coyanosa, through the border near San Elizario, to connect with Mexico’s existing Tarahumara pipeline. Fernando Calvillo, Fermaca’s President and CEO, expects the connection to be up and running by the first quarter of 2017.

“We believe that sooner or later, an integrated energy hub will come into being between Canada, the US, and Mexico, a development we hope will be facilitated by the Roadrunner project,” shares Calvillo. He predicts that access to gas at a price between US$3 and even US$5 per million BTU will continue to benefit Mexico’s power producers and industrial consumers, while creating interesting markets for US gas producers just across the border. The company has also started construction on the Encino-La Laguna project that begins in the state of Chihuahua and ends in the state of Durango, and is working to meet two delivery dates. One segment should be operating by April 2016 and the second part is expected for the first quarter of 2017. The project will employ the same and improved procedures and techniques used in the Tarahumara project, which was the first pipeline delivered to the federal government on time and on budget.

As a midstream company, Fermaca is also interested in crude oil and refined products. The Energy Reform, in this sense, will allow the company to grow and expand into new markets. Calvillo believes that the industry has taken an interesting turn due to the lack of natural gas production in Mexico, the drive to gas-fired power generation, and the pricing and availability of gas in the US. This new dynamic has allowed Fermaca to become an international company, building its first cross-border pipeline between Mexico and the US.

As a result of the Reform, the role of CFE in the market is changing and CENAGAS is the new system operator. However, Calvillo firmly thinks that CENAGAS’ activities will not impact those of Fermaca, as both companies operate using independent systems. Financially, CFE will improve once fuel supplies stabilize and the infrastructure is up and running, while the new electricity market begins to operate. “In the long term, perhaps it will not make too much sense for the future CFE to be involved in so many activities,” Calvillo admits. “But today, I believe CFE is doing perfectly well, and that its current strategy is working.”

Calvillo does not believe that operation of pipelines would be in CFE’s best interests. That is partly why CFE tenders capacity and the transportation services. “Both institutions should rely substantially on private companies and the whole country should pay for the infrastructure,” offers Calvillo, using Spain’s experience as a precedent. The Spanish government formed an agency, and every company with a promising project was able to enroll in the system. Without a need for the government to keep the natural gas pipeline industry, it may soon sell its assets, and create tenders by sectors, allowing companies like Fermaca to acquire these pipelines. At the moment, the company is undergoing a restructuring and, having issued its first bond, it is closer than ever to its aim of being a public company. “We truly look forward to becoming a public company, as this would give us further growth opportunities,” Calvillo reveals. However, for the moment, the company’s main priorities are the construction of Encino-La Laguna and the Roadrunner. Fermaca also want to keep its business development side focused on future projects, including any new tenders from CFE, PEMEX, or CENAGAS.