Gas Shortages In Southern Mexico To Reach Critical Levels In November

(S&P Global Platts, 18.Oct.2018) — Gas shortages in southern Mexico will reach a critical point in November as Pemex natural gas production continues declining and users lack access to LNG terminals, industrial users in southern Mexico told S&P Global Platts on Thursday.

Pemex is not nominating gas for several industrial users in southern Mexico as a result of decreasing production, Cleantho de Paiva Leite, director for new businesses with Braskem Idesa, told Platts on the sidelines of the Mexican National Petrochemical Forum.

“The situation could lead to a complete stoppage of the industrial activity in southern Mexico,” said de Paiva Leite, whose company operates the most polyethylene capacity in Mexico.

Pemex is allocating its diminishing gas output to fulfill the needs of its subsidiaries and power generators, a second petrochemical company in southern Mexico told Platts at the forum.

PIPELINE CONSTRAINTS

Gas shortages in southern Mexico have become more acute due to infrastructure constraints on gas flows into Coatzacoalcos, Veracruz, one of Mexico’s largest petchem and industrial hubs, Paiva said.

This situation will be eased once the Mexican government completes the reconfiguration of the Cempoala compressor station in the state of Veracruz, which is expected to be completed in Q1 2019, according to Mexico’s Energy Secretariat (SENER).

The only options for users in this situation is to shut down operations or consume gas without a nomination being sent to Pemex, which would result in steep penalties, Miguel Benedetto, general director of the Mexican Association of the Petrochemical Industry (ANIQ), told Platts on the sidelines of the forum.

However, consuming gas under or above the nominated level leads to natural gas imbalances in the network that is addressed by system operator Cenagas via LNG injections, Benedetto said.

A large steelmaker in northern Mexico told Platts that some industrials with access to declining Pemex gas fields in northern Mexico also are resorting to taking gas from the system without nominations and incurring imbalance penalties.

Earlier this month, Mexico’s business coordinating council, or CCE, told Platts that Pemex also is not delivering all the gas that is being nominated.

“It isn’t a good signal. We are having gas supply problems,” Roger Gonzalez, president of CCE’s energy commission, told Platts. “The reduction has been limited, but this is decreasing system pressure and affecting industrial users’ operations.”

LNG PENALTIES

Cenagas charges for LNG at spot prices with a 50% penalty, which is hugely uncompetitive, he added. “So, choose how you want to die: by shutting down operations or paying $21/MMBtu gas,” Benedetto said. LNG prices in Mexico are three to four times more expensive than continental gas imports.

Pemex, Braskem Idesa and INAQ told Platts that to address the current gas shortage the Mexican government must stop targeted LNG penalties to shippers and end-users and reverse deregulation to a situation in which all users share LNG costs.

Benedetto said the government needs to intervene because the imbalances on the system are a result of gas shortages due to declining Pemex production.

“Before when unbalances happened, LNG expenses were shared by everyone in Mexico, pushing gas prices to $4-$5/MMBtu. Now, we in the south pay gas at $20/MMBtu due to the new balancing regulation,” Paiva said.

Recent data from SENER shows the gas demand in the petchem sector has been in free fall, reaching 214 MMcf/d in 2016 from 697 MMcf/d in 2013.

Pemex didn’t immediately respond to requests for more information on the southern supply shortages. However, Carlos Trevino, Pemex’s CEO, previously told Platts the country is facing irregularities in its gas supply. “Without a doubt, there is not enough gas to supply all the market demand including Pemex and its subsidiaries,” Trevino said in an interview at the Mexican Petroleum Congress in Acapulco at the end of September.

REVERSING LIBERALIZATION

Benedetto said ANIQ wants Mexico’s Energy Regulatory Commission (CRE) to reverse the liberalization of wholesale gas prices, known as first-hand gas sales or VPM.

CRE previously set the maximum price for gas to be sold by Pemex using a formula based on US prices. VPM prices were regulated under this formula at two hubs, Reynosa on the Mexico-Texas border and Ciudad Pemex in southern Mexico. The switch to free-market conditions was expected to provide Pemex and other independent producers the revenue to reverse the country’s production declines.

Pemex’s gas production has declined from more than 6 Bcf/d at the beginning of the decade to an average of 3.9 Bcf/d in 2018, SENER’s data shows.

Benedetto said no open-market conditions exist today in southern Mexico, adding that lack of infrastructure to move gas south prevents new shippers from servicing users in this region, leaving a captive market under Pemex.

Pemex also isn’t reacting to market incentives to boost production in southern Mexico although industrial users are being curtailed or are having to pay LNG gas prices, he added. The regulations anticipated a “competitive market that doesn’t exist,” Benedetto said.

Braskem Idesa’s Paiva said that Mexico can’t change overnight from a state monopoly to a free market without ensuring there is enough infrastructure and interconnections in the system. “This has to be an organized transition with the coordination of CRE, Cenagas, Pemex, and SENER,” he added.

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#LatAmNRG

Pemex, Consortium Sign First Ever Pre-Unitization Agreement in Mexico

(Pemex, 20.Sep.2018) — Pemex and the Block 7 consortium signed the first ever pre-unitization agreement in Mexico.

Petróleos Mexicanos (Pemex) and Talos Energy, as operator of the Block 7 Consortium, announced that Pemex and the international Block 7 Consortium (Talos Energy, Sierra Oil and Gas, and Premier Oil) signed a Pre-Unitization Agreement (PUA) related to certain tracts within the Amoca-Yaxche-03 allocation (assigned to Pemex as part of Round 0) and the contiguous Block 7 production sharing contract (assigned to the consortium by the National Hydrocarbons Commission as part of the first tender of Round 1). Both areas are situated in the offshore portion of Mexico’s prolific Southeast Basin.

This is the first Pre-Unitization Agreement ever to be signed in Mexico. Under the country’s recently revamped legal and regulatory framework, this two-year agreement enables information sharing related to the recently announced Zama discovery and its potential extension into Pemex’s neighboring block. It also sets a clear path for the signing of a Unit Agreement and Unit Operating Agreement in the event a shared reservoir is confirmed, as it establishes a defined process based on international practices to determine the resulting participation of each party in the potential overall development.

As a result of the agreement, both parties will immediately form a Working Group, with the objectives of maximizing operational and informational efficiencies, defining activities on each tract that optimize the collection of data in the area, and reducing any potential hazards, all to maximize the benefits for México. The Working Group will be comprised by legal and technical representatives from the member companies.

The PUA has previously been approved by the Ministry of Energy (SENER).

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Pemex Aims to Reduce CO2 Emissions by 25% by 2021

(Pemex, 26.Jul.2018) – Environmental protection and sustainability, the governing principles of the State-Owned Productive Company’s work

The CEO of Petróleos Mexicanos, Carlos Treviño, inaugurated the 7th Environmental Conferences this morning

For Petróleos Mexicanos, environmental protection and sustainable development are high-priority values. Therefore, the State-Owned Productive Company expects to reduce its carbon dioxide (CO2) emissions into the atmosphere by 25 per cent, as well as to increase water recycling by 60 per cent by 2021, compared with 2016 levels.

This morning, Pemex CEO Carlos Alberto Treviño Medina, presided over the grand opening of the 7th Environmental Conferences, and during his speech he expressed the company’s commitment towards minimizing the environmental impact of its activities, which stems from a respectful approach towards the environment and efficient use of natural resources.

During the event, which was held in the 18 de Marzo Auditorium of the Pemex Management Center, Treviño Medina stated that sustainability is a factor that characterizes Petróleos Mexicanos. “We must continue to apply the best international practices and remain on the leading edge of the international oil industry, while meeting the objectives of the United Nations’ Sustainable Development Program,” he said.

The 7th Environmental Conferences will be held over two days, and it is in this forum that the Petróleos Mexicanos Sustainability Report for 2017 was disclosed by Pemex’s corporate director of Planning, Coordination and Performance, Rodulfo Figueroa Alonso. The report details the actions carried out by the company in environmental matters.

This year, the 7th Environmental Conferences have Sustainable Development Objectives at their core. These are part of an initiative of the United Nations Program, which consists of 17 global targets to eradicate poverty, protect the planet and ensure prosperity for all, as part of a sustainable development plan.

During the event, the deputy secretary for Environmental Protection Management for the Ministry for the Environment and Natural Resources (initials in Spanish, SEMARNAT), Martha Garcíarivas Palmeros, reiterated that Mexico signed the Paris Accord, which establishes the goal of reducing Greenhouse gas emissions by 22 per cent in 2030.

The official congratulated Pemex for its participation in the National Air Quality Strategy, through which various actions to protect the environment have already been set in motion.

On the other hand, the deputy secretary of Planning and Energy Transition for the Ministry of Energy (acronym in Spanish, Sener), Leonardo Beltrán Rodríguez, stated that the Pemex Business Plan for 2017-2021 clearly establishes a clear commitment in environmental matters, which exemplifies the company’s position regarding sustainability.

During his participation in this event, the General Secretary of the Mexican Oil Workers’ Union, Carlos Romero Deschamps, expressed the oil workers’ commitment towards performing their work responsibly and in an environmentally friendly manner.

Several awards were presented to Petróleos Mexicanos in different areas for successfully applying environmental practices.

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Pemex, Energy Offices to be Moved

(Natural Gas Intelligence, Ronald Buchanan, 13.Jul.2018) – Mexico President-Elect Andres Manuel Lopez Obrador aims to decentralize the government in a sweeping plan to ease the congestion of population, buildings, vehicles and pollution in the “megalopolis” of Mexico City, a strategy likely to impact the country’s energy sector from top to bottom.

The government agencies set to be relocated to the provinces include state-owned Petroleos Mexicanos (Pemex); state power utility Comision Federal de Electricidad (CFE); energy ministry the Secretaría de Energía (Sener), as well as the energy regulators, the Comision Nacional de Hidrocarburos (CNH) and the Comision Reguladora de Energia (CRE).

Under the plan, Pemex headquarters would be moved from its 51-story Mexico City tower to Ciudad del Carmen on the southeastern Gulf Coast, a base of support that supplies operations in the Sound of Campeche, where most oil and gas is produced.

Sener, CNH and CRE are slated to be moved to Villahermosa, capital of Tabasco, the state where Lopez Obrador was born.

The age of the internet should ease the transition. These days, almost all government business is conducted online.

Since the 2013-14 energy reform, sessions of the CNH and CRE have been broadcast live by Internet, and the rules of both regulators insist in keeping a distance from representatives of the companies involved in auctions.

In order to ensure transparency and avoid any hint of corruption, CNH and CRE commissioners have to provide reports to their superiors of meetings with representatives of companies, rather as diplomats of the Western and Soviet blocks did whenever they met each other at cocktail parties during the Cold War.

The Federal District of Mexico City and its surrounding conurbation currently houses a population of close to 20 million.

Public transportation is far from adequate and roads are often gridlocked. Working hours in Mexico are the longest in the Organization for Economic Co-operation and Development, aka OECD. Many people spend four hours a day — two each way — between their homes and their workplaces.

Speaking in a video produced by his Morena party, Lopez Obrador said that the decentralization plan should help improve the quality of life in the capital as well as providing more equal opportunities for the nation’s regions.

“There are islands of rapid growth in the country, but they are surrounded by areas that have been abandoned,” he said.

Yet another reason, he added, was the susceptibility of the capital to earthquakes. About 10,000 people died in the 1985 earthquake. Since then, stricter building regulations and the use of more sophisticated technology have improved safety standards. Even so, two severe tremors last September caused at least 465 deaths, and 180,000 homes were destroyed in the capital and in southern Mexico.

The plan to decentralize is to be executed steadily, in a process that is likely to take almost all of the six years of the upcoming administration and with a minimum of disruption, according to Monterrey-based businessman Alfonso Romo, who Lopez Obrador has named to be his chief of staff.

Under the plan, five key ministries would remain in Mexico City: Gobernacion, the Interior ministry; the Finance and Foreign ministries; the ministries of Defense (Army and Air Force), and the Navy.

López Obrador has said on several occasions that, as president, he will live and work in the National Palace in the historic center of Mexico City, where critics claim his presence will make even worse the gridlock that often besets the area.

For decades, Mexican presidents have worked and lived in the relatively leafy surroundings of Los Pinos, the Mexican equivalent of the White House.

The Pemex tower, in a nondescript but central barrio of Mexico City, is now one of several tall buildings that dot the Mexico City skyline. But when it was built in the early 1980s it was by far the nation’s largest building and a symbol of Mexico’s huge oil boom that ended in an equally spectacular financial crash and the nationalization of the Mexican banks.

The corporate offices of the CFE are in a much more elegant part of central Mexico City than where the Pemex tower is located. The Energy Ministry is currently housed in the south of the capital, near the Plaza de Toros, the largest bullring in the world.

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Mexico Considering Mechanism for Geothermal

(ThinkGeoEnergy, 26.Jun.2018) – Indicated in a recent webinar as part of the upcoming GEOLAC geothermal conference, a new price mechanism specifically tailored towards geothermal is being considered for Mexico.

As reported by ReNews, Mexico is considering a dedicated price support mechanism for geothermal energy outside its technology-neutral auctions dominated by wind and solar, as early as next year.

Under current tender schemes, geothermal essentially could not compete on the low pricing of intermittent sources such as wind and solar, a fact widely complained about by the industry. The auction system so far has not provided any value to geothermal energy and its baseload capacity offered to the market.

Mexican energy ministry SENER’s European representative Nelson Mojarro said “We understand it is more challenging for certain technologies and we are considering whether there needs to be another auction for other technologies specifically to boost geothermal,” he added.

The fourth Mexican renewables auction process for around 2,000 MW in capacity is currently being held with sealed bides and results expected to be announced in November this year. The next auction could then take place in 2019.

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CFE Cancels Baja California Sur Natural Gas Project

(Platts, 30.Jun.2017) — Mexican state-run utility CFE has canceled its auction to bring natural gas into the Pacific state of Baja California Sur, the company said.

CFE said the gas project isn’t necessary as its new underwater transmission line project will fulfill the electricity needs of the state.

“By opting for this alternative to strengthen the reliability of the Baja California Sur electrical system, CFE will no longer continue with the auction for the provision of natural gas transportation to the entity,” it said in a statement Thursday.

The $600 million natural gas project would have provided up to 227 MMcf/d of fuel to transform CFE’s fuel oil generation fleet in Baja California Sur, according to CFE’s auction documents.

The $1 billion underwater transmission line will cross the Sea of Cortez, connecting Bahia de Kino, Sonora, and Infernito, Baja California Sur, according to Mexico’s Energy Secretariat (SENER) National Electric System Development Program (PRODESEN) 2017-2031.

The transmission line is expected to be operational by 2022, and it will connect the state with the rest of the country for the first time through a 105-km, 400 kV underwater direct transmission cable.

The underwater transmission line will connect the state with CFE’s growing combined-cycle natural gas plant fleet in the states of Sonora and Sinaloa, thus displacing expensive diesel- and fuel oil-generated power in Baja California Sur.

In Topolobampo, Sinaloa, CFE awarded Spain’s Iberdrola the construction of the 778-MW Topolobampo II and 777-MW Topolobampo III combined cycle plants. Both will be operational in 2019 and 2020.

CFE said the project would provide “highly competitive electricity prices” to Baja California Sur’s 40,000 users, which receive the most electricity subsidies in the country, while cutting emissions from fuel oil and diesel generation in the state.

PRODESEN showed that Baja California Sur has 976 MW of fuel oil- and diesel-fueled generation, of which 418 MW is internal combustion engines, by far the largest amount in any Mexican state.

Jose Luis Leyva, CFE’s communications director, told S&P Global Platts on Friday that Baja California Sur’s existing diesel and fuel oil capacity will still be used by CFE for backup and peak generation.

The construction of the underwater transmission line will help to increase the integration of more renewable capacity in Baja California Sur, CFE said in the statement.

According to PRODESEN, 423 MW of renewable energy capacity will be built in the state over the next 15 years, 312 MW of which will be 12 solar photovoltaic projects.

–Daniel Rodriguez, newsdesk@spglobal.com

–Edited by Annie Siebert, ann.siebert@spglobal.com

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Mexican Petroleum Congress Opens

(Pemex, 10.Jun.2015) – The Ministry of Energy (SENER), Pedro Joaquín Coldwell, opened the 10th Mexican Petroleum Congress at the Guadalajara Expo, which brought together 270 national and international companies with more than eight thousand participants from 12 countries.

The event was attended by the CEO of Pemex, Emilio Lozoya, and the governor of Jalisco, Aristóteles Sandoval.

“We, Mexicans, are now facing a new paradigm in the oil and gas sector where new players are taking part in the production chains of hydrocarbons,” said the head of SENER, who claimed that this trend will intensify in the coming months.

After announcing the first discoveries of hydrocarbons made taking advantage of the tools provided by the Energy Reform, Emilio Lozoya stated that Pemex is transforming from its very basis the in which it operates, in order to focus on generating economic value throughout its activities.

In this sense, he outlined four main lines of actions for this change to become effective: create a corporate cultural change to achieve high performance; drive operational practices to optimize the use of resources; establish a process management that eliminates inefficiencies and duplication; and maximize the profitability of activities, increasing competitiveness.

Additionally, the Congress President and Operating Chief of Pemex Exploration and Production, Gustavo Hernández, pointed out that the Energy Reform will enable an increase on production of hydrocarbons, improving costs in a scheme in which private companies will complement the investment of Petróleos Mexicanos through contracts for exploration and extraction of oil and gas.

Likewise, he observed, that better results will be obtained on competitive conditions in the refining, transportation and storage of produced hydrocarbons.

Thus, he added, Pemex will be strengthened by being able to associate with national and international companies to develop new projects or optimize developing projects that are already being operated on its own.

Afterwards, the Governor Sandoval Díaz thanked the Congress in Jalisco and noted that the event will enable the exchange of ideas and experiences for the benefit of the oil industry.

The organizations that combine efforts in order to conduct the Mexican Petroleum Congress are the Association of Petroleum Engineers of Mexico, the College of Petroleum Engineers of Mexico, the Society of Petroleum Engineers (Mexico), the Mexican Association of Petroleum Geologists and the Mexican Association of Exploration Geophysicists.

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