Developing Natural Gas Infrastructure in the Americas the Mexican by vrz15071

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									Developing Natural Gas Infrastructure in
   the Americas: the Mexican case

            NARUC Committee on Gas

         Francisco Salazar Diez de Sollano
                  Chairman, CRE

                  July 17, 2007
        Introduction: CRE

• CRE (Comisión Reguladora de Energía) was created in 1992 as a
  consulting body to the Secretary of Energy. Its objective was to
  prepare the rules that would regulate the relationship between
  the State’s utilities and the private investors in the power
  sector.
• In 1995, the Congress passed a reform opening the
  downstream activities in the natural gas sector. Then, CRE was
  also constituted as the formal regulator of the energy sector
  and was given operational and technical autonomy.
• CRE’s mandate is to promote the efficient development of the
  activities it regulates. In doing so, CRE looks for a balance
  between the interest of the consumers and that of the
  investors.
           CRE’s regulation powers
Natural Gas



                                                                                  Marketing


                                                             Surface transport.       Bottle Distribution
LPG
                                                                                                Pipeline
                                                                   Pipeline                   Distribution
                                                                                   Marketing


                                CFE & LFC
                                                                National
                                                               Transmission
                                    Generation              Transmission
Power                                                              Grid                Distribution

                                     Generation
                                Third Parties                 Transmission
                                                               Others

                            Imports / Exports
                              Imports

        Reserved to the State                   Open to private investment
                                                                                  Regulated by CRE
           Natural gas demand

• According to the Ministry of Energy(1), natural gas
  demand was 6.549 bcfd in 2006 .
• 48% corresponded to the oil sector; 35.7% to the
  power sector; 14.6% to the industry (including
  Pemex Petrochemicals), and 1.6% to residential and
  other services.
• Natural gas demand is expected to increase at an
  overall annual rate of 3.9% over the next 10 years.

  (1)   Prospectiva del mercado de gas natural 2006-2015
 Natural gas forecast 2005-2015

         10000
          9000                                                                         3.9 %
          8000
          7000
                                                                                       2.8 %
          6000
MM CFD




          5000
          4000
          3000
                                                                            Demand
          2000
                                                                            Supply
          1000
             0
                 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

                    Source: SENER 2006 – 2015 Prospectiva del Mercado de Gas Natural
Gross NG Balance 2005-2015
                                                                 9.11   9.49

                                                   8.28   8.69
                                            7.90
                                     7.58
                              7.05
         6.11   6.65   6.61

  5.72
       Natural gas for power plants

• Power forecasts 2005-2015
   – 4.8% annual demand growth rate from 191 TWh
     in 2005 to 305 TWh in 2015
   – 24 GW of new capacity required to meet demand
     (approx. 49% of current capacity)
   – CFE will install 23,545 MW during the next decade
   – Combined cycle power plants will grow from 33%
     to 51% of the total capacity by 2015
• 7.3% average annual natural gas
  growth over the next decade (for power)
Natural gas imports 2005-2015

                                                        Imports will peak by 2015 at 2.2 BCFD




     Source: SENER 2006 – 2015 Prospectiva del Mercado de Gas Natural
       How to face increasing demand?

• Continue promoting private investment in
   – Development of LNG terminals along both the
     Pacific and the Gulf coasts
   – Pipeline infrastructure both to strengthen cross-
     interconnections and access to new LNG plants
• Start exploiting coal bed methane reserves
• Focus Pemex’s investment in areas of paramount
  interest such as exploration and production of oil and
  gas
       CRE’s regulation objective

CRE’s regulation must:
• Ensure technical engineering excellence through
  modern standards and third-party auditing
  procedures
• Approve general terms of service that satisfy user’s
  needs and reflect current practice in industry
• Approve rates that are competitive and allow fair
  rates of return to investors
• Lead to predictable and stable regulatory conditions
  with adequate flexibility
Permits granted by CRE


                                                             Capital
                                              Length
      Type                   Licenses                      Investment    (MM USD)
                                                 (km)

Transport                         155           12,354          1,979
  Open
                                    20            11,501         1,744
  Access
  Non-Open
                                   135               853          235
  Access
Distribution                       22           35,494          1,669
LNG terminals                        5            n.a.*         2,000

TOTAL                             182           47,848          5,648

* LNG total storage capacity of 1,250,000 cubic metres
                                                                                                        Mexico’s natural gas transport network
     Mexicali
9                S.L. Río Colorado
                                        Imports                   Imports
    15 11
                                                            Cd. Juárez
                             Nogales
                                     10 NACO 14                             2                                                                                                             PRIVATE PIPELINES
                                                   Agua

                               Santa     Cananea
                                                   Prieta
                                                                                                                                                                                   1       Kinder Morgan
                 LIBERTAD
                                Ana                                                                                                                                                2       Gasoductos de Chihuahua
                                                                                                                                                                                   3       Igasamex Bajío
                                                                                                                    Imports                                                        4       Energía Mayakán
                                                                           Chihuahua
                                       Hermosillo                                                                                                                                  5       Tejas Gas de Toluca
                                                             Anahuac
                                                                                    Delicias                                                                                       6       FINSA Energéticos
                                                                                                                                Piedras Negras
                                        Guaymas
                                                                                       Cd.
                                                                                                                                                                                   7       Transportadora de Gas Zapata
                                                                                       Camargo                                            Nuevo                                    8       Gasoductos del Bajío
                                                                          Jiménez                      Química
                                                                                                       del Rey
                                                                                                                                          Laredo
                                                                                                                                                           Imports
                                                                                                                                                                                   9       Transportadora de Gas Natural
                                                                                Escalón                                          Miguel
                                                                                                                                           Pandura
                                                                                                                                                                                           de Baja California
                                                                                                           Castaños
                                                                                                                                 Alemán
                                                                                                                                                     13                           10       Ductos de Nogales
                                                                                    Gómez P.
                                                                                                                                 1                        6      Matamoros        11       Gasoducto BajaNorte
                                       TOPOLOBAMPO                               Cd. Lerdo              Parras
                                                                                                                                                  12 18                           12       San Fernando
                                                                                                      Torreón
                                                                                                                   Saltillo                                                       13       Gasoductos del Río
                                                                                                                                     Sn. Fernando                                 14       Agua Prieta
                                                                            Durango                                                                                               15       Conceptos Energéticos Mexicanos
                                                      MAZATLAN                                                                                                                    16       Transportadora La Huasteca
                                                                                                                                           C.F.E.
                                                                                                                                           Colinas
                                                                                                                                                               ALTAMIRA           17       Tejas Gas de la Península
     PACIFIC OCEAN                                                                                                  SAN LUIS                      Campo                           18       Terranova Energía
                                                                                          Zacatecas                  POTOSI                        Tam.
                                                                                                                                                               Cd. Madero
                                                                                                                                                               Tampico
                                                                                       AGUASCALIENTES                                                                                                                                  Cancún
                                                                                                                                  3
                                                                                                                                                     16                                                                           17
                                                            ISLAS
                                                            MARIAS
                                                                                                                    8
                                                                                     Guadalajara                                                                 Poza        GULF OF MEXICO                            Mérida Valladolid
                  LEGEND                                                                                  Salamanca           Qro.
                                                                                                                                           Tula
                                                                                                                                                     C.P.Q.
                                                                                                                                                                 Rica
                                                                                    C.F.E. El Verde                                                  Poza R.
                PEMEX transmission system                                                                                                 Sta.
                                                                                                                                                                                                               4




                                                                                                                                                                                                                                           CARIBBEAN SEA
                Private open access                                      230 km                                  Morelia                  Ana
                                                                                                                                                      Pachuca
                Project under evaluation at CRE                                                                                      5                   Jalapa
                                                                                                                                                                                                                   Campeche

                Feasible project                                                                                                Toluca
                                                                                                                                                 7
                                                                                                                                                                              C.P.Q.
                                                                                                                                                                            Matapionchi
                Feasible LNG terminal                                                                                         Cuernavaca
                                                                                                                                                 Puebla                                                 Atasta
                City                                                 MANZANILLO
                Natural gas injection point                                                                                                                                                          C.P.Q.
                                                                                                                                                                                                   Cd. Pemex
                Petrochemical plant                                                                                                                                                           Nvo. Teapa
                                                                                             L. Cárdenas
                                                                                                                                                                                            Cactus y
                                                                                                                                                                                          Nuevo Pemex
        Developing LNG terminals

• LNG project solutions are varied
   – Having a predictable and transparent regulation gives
     investors and developers the flexibility to structure their
     projects in a variety of ways
   – Terminal Developers (TD) can participate in acquisition of
     LNG through different schemes
   – TD can sign long-term contracts with utilities and shippers
     and/or assign all or a fraction of the terminal capacity to a
     marketing function
   – Shippers can arrange for their LNG deliveries or have the
     terminal/marketer do it.
   – CRE has resolved all LNG applications in approximately 12 –
     18 months
      Developing LNG Terminals

• Leading times are currently very long for LNG
  projects
• Construction time is typically 3 years
• There is an increasing demand of LNG
  terminals, especially in North America
• Costs of steel and concrete have increased
  significantly
• Additionally, liquefaction plants have been
  delayed in several countries
      LNG regasification plants
                                           • Six applications submitted, 5 permits granted
                                           • Commercial operation: Sep 30th, 2006 (Altamira)
                      Tijuana
                                Mexicali
                                           • ECA (Sempra): operation in March 2008

                                             Naco
                                                       Cd Juarez
                        Libertad
                                                                                        Altamira
                                                     Chihuahua                          Shell-Total
Baja California                                                                         • CFE bid
1.    ECA (Sempra)
                                                                            Reyno       • 140,000 m3 x 2
•    160,000 m3 x 2              Topolobampo                                sa
                                                                     Monterrey
                                                                                        • 0.5 - 1.1 BCFD
•    1.0 – 1.3 BCFD
2.   Shell Baja
•    170,000 m3 x 2                                                              Cd Madero

•    1.0 – 1.3 BCFD                                                                PR

                                                                   Toluca D.F.
                                                Manzanillo                                          Cd. Pemex
        Problems…

• Private projects associated to private industry and LDC’s have
  had limited success
   – Large consumers are reluctant to sign long term contracts
   – Pemex’ supply and services are preferred
   – Competing fuels are priced with non-market criteria
• As a result, most transport and LNG infrastructure is tied to
  CFE’s need for CC generators and Pemex’ requirements
• Most of the new combined cycle power plants are located near
  Pemex’ transmission system or LNG terminals
• Both companies dominate the gas market
        Towards a new transport model

• CRE is currently reviewing PEMEX SNG (national pipeline
  system) rates, the methodology to calculate them and the
  corresponding tariffs.
• The idea is prepare SNG to be the main part of a National
  Integrated Transport System (SNI)
• Issues being discussed include using a postage stamp instead of
  a mcf mile methodology, desired levels of central planning and
  expansion of the system, roll-in criteria, desired degree of
  competition, etc.
• Although SENER is responsible for energy policy and planning,
  CRE’s opinion is central in this issue.
       Conclusions

• Natural gas foreseen demand’s growth in Mexico will
  require infrastructure to secure supply.
• So far, CRE has developed a predictable, transparent
  regulation that can accommodate flexibility to
  investors.
• Current infrastructure in Mexico has been mainly
  linked to CFE and PEMEX through long term
  contracts.
• New infrastructure to allow regional growth and
  active private participation in new projects poses
  regulatory challenges to the CRE.

								
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