Page 4 - LatAmOil Week 34 2019

LatAmOil COMMENTARY LatAmOil
Mexico strikes a deal on gas pipelines
With help from President Lopez Obrador, CFE has reached an agreement that will allow it to import 40% more gas from the Permian and Eagle Ford shale basins and also save up to $4.5bn
WHAT:
Mexico has struck a deal with four companies involved in multiple gas pipeline projects.
WHY:
The agreement could help CFE pay less for gas and give US shale operators a new outlet for gas.
WHAT NEXT:
The election of another leftist government might give Mexican of cials a reason to push for more changes in terms.
FOR many of the companies working in the Per- mian and Eagle Ford shale basins, Mexico looks like it ought to be the answer to their prayers.
ese shale operators have been blessed – or perhaps cursed – with an overabundance of gas. ey have more than they need to support re-in- jection programmes, and under the relevant state laws they are usually not allowed to are all of it o . And for a long time, they have not had access to pipelines with su cient capacity to reach paying customers.
Meanwhile, Mexico needs gas. e country is working to expand the use of gas in electricity generation, and demand for energy is rising. As such, it ought to be a prime destination for the extra gas coming out of the ground in Texas and New Mexico – especially since its northern bor- der lies within a few hundred miles of the shale elds.
Roadblocks
is line of argument led Canada’s TC Energy and California-based IENova, an affiliate of
Sempra Energy, to pursue plans for the con- struction of the Sur de Texas-Tuxpan gas pipe- line, with a design capacity of nearly 27bn cubic metres per year. But CFE, Mexico’s national power provider, threw a wrench into the works.
Earlier this year, it began arguing that the terms of the contract for this pipeline (as well as six others designed to pump gas into and across Mexico) were overly favourable to the foreign investors.It sought arbitration and demanded the right to negotiate new terms and to collect $899mn in overpayments.
CFE’s actions effectively suspended work on the Sur de Texas-Tuxpan link, which was nearly ready to begin commercial operations. TC Energy and IENova nished work on the 770-km Mexican section of the link in June but have not been able to begin shipments, owing to CFE’s refusal to acknowledge the completion of construction.
is move has hurt shale operators, as it has prevented them from using an export outlet  with the capacity to handle large amounts of gas.
EIA.gov
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w w w . N E W S B A S E . c o m Week 34 28•August•2019