Boxscore Construction Analysis
A. Blume, Managing Editor
Adrienne.Blume@GulfPub.com
Mexico suffered years of gas shortages as US pipeline capacity failed to keep up with its growing industrial demand for gas, and as state energy firm Pemex focused on more profitable oil production. However, the country’s constitution was rewritten in 2013 to allow private investment in its oil and gas sector for the first time in eight decades, paving the way for US firms to provide more energy to its southern neighbor.
Mexico is investing nearly $8 B to expand its 5,500-mi natural gas pipeline system, focusing on central and northern industrial cities (Fig. 1). The majority of this network will be filled by natural gas produced from US shale plays, primarily in southern Texas and in the Eagle Ford shale.
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Fig. 1. Existing and planned gas pipeline routes and compression stations in Mexico. |
Two major cross-border pipeline projects have been announced in the last two years. These projects have prompted Mexico to abandon plans to build nuclear power stations and to instead construct new combined-cycle power stations.
ONEOK–Fermaca. ONEOK Partners LP has an equal JV with a subsidiary of Fermaca Infrastructure BV to construct a pipeline that would transport gas from West Texas to Mexico. The gas from the Waha gas hub in the Permian basin would supply fuel to power plants in southern Chihuahua, Mexico.
The Roadrunner gas transmission pipeline project extends west from ONEOK Partners’ ONEOK WesTex transmission natural gas pipeline system at Coyanosa, Texas to a new international border-crossing connection at the US and Mexico border near San Isidro, Texas. Here, the pipeline will connect with Fermaca’s Tarahumara gas pipeline.
The project, to be constructed in three phases from 2016–2019, includes approximately 200 mi of pipeline designed to transport up to 640 MMcfd of natural gas, with up to 570 MMcfd of the gas to be transported to Mexico’s growing markets.
The first phase of the pipeline project, which will add 170 MMcfd of capacity, is expected to be completed by the first quarter of 2016. The second phase, which will increase the pipeline’s available capacity to 570 MMcfd, is expected to be completed in the first quarter of 2017. The project’s third and final phase is anticipated to be complete in 2019, and will increase the pipeline’s available capacity to 640 MMcfd.
ONEOK Partners will manage the project construction and will operate the pipeline after it is completed. The project cost is estimated at $500 MM.
Pemex–First Reserve–BlackRock. Pemex signed a $900-MM deal in March with US investment firms BlackRock and First Reserve (Fig. 2) to commence work on the second phase of the 462-mi Los Ramones II pipeline. The deal gave BlackRock and First Reserve a collective 45% stake in the project.
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Fig. 2. In March, Pemex signed a $900-MM pipeline agreement with First Reserve |
The Los Ramones II pipeline project will encompass two sections from northern to central Mexico and have a gas transport capacity of 1.4 Bcfd, all of which has been contracted by Pemex under a 25-year agreement. Construction of the project began in 2014, and completion is expected in 2016.
Gas: A bright spot in Pemex’s future. The pipeline investments come at a critical time for Pemex, which cut its budget for 2015 by approximately $4 B due to the drop in crude oil prices.
However, the cross-border gas pipeline projects, funded by private equity and slated to bring over 2 Bcfd of US shale gas to Mexico’s power-generation sector, should help keep the lights on in Mexican homes and brighten the country’s energy economy for decades to come. GP
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