Page 5 - LatAmOil Week 41

LatAmOil COMMENTARY LatAmOil

The VAG link, which has a capacity of 886mn next year compared with 2020.
cubic feet (25.09 mcm) per day, is the final leg of In the longer term, the future of Permian gas
the Waha-to-Guadalajara (Wahalajara) system remains closely linked to oil price trends, as well
from the Permian Basin. as questions over how quickly oil and gas will fall
It runs from West Texas to one of Mexico’s out of favour as the energy transition unfolds.
most economically vital and heavily industrial- Nonetheless, exports to Mexico are only antic-
ised regions – the area known as Bajío, which ipated to grow over the coming months – and
includes the city of San Luis Potosí, as well as have the potential to do so for years to come.
Aguascalientes and Guadalajara.
Mexican LNG plans
Mexico’s domestic gas market Some of that growth may take the form of
The Wahalajara system is anticipated to help cross-border pipeline deliveries of gas to LNG
ease volumes and stabilise prices at the Waha plants on Mexico’s west coast.
hub in West Texas. Consultancy RBN Energy Sarah Bairstow, the chief commercial officer
estimates that exports to Mexico from Waha will of Mexico Pacific Ltd (MPL), said during Indus-
average 600 mmcf (17 mcm) per day this year, try Exchange’s Sixth Mexico Gas Summit last
but it also says that current flows have already month that the volume of excess gas coming out
climbed to 800 mmcf (23 mcm) per day and are of the Permian might hit 20 bcf (566.4 mcm) per
set to rise further in the future. day, enough to support up to 100mn tonnes per
Meanwhile, Waha will not be the only ben- year (tpy) of LNG production, by 2025. Since “
eficiary of these shifts. Mexico’s national power US authorities are not likely to green-light the Mexico’s west
provider CFE has already signed a long-term establishment of so much new capacity on the
take-or-pay agreement that will make it the pri- Gulf Coast, gas producers may find Mexico to coast is in a good
mary buyer of gas flowing through the Waha- be a better option, she said.
lajara network, and it intends to use the fuel to She emphasised the potential of Mexico’s position to export
supply its own thermal power plants (TPPs) and west coast, noting that the region was in a good LNG to either Asia
to supply major industrial consumers. position to export LNG to either Asia or South
CFE stands to boost its earnings by doing America at a lower cost than US Gulf Coast or South America
so. Permian gas is relatively cheap, so the util- (USGC) plants. “Mexico could not be in a better
ity will be able to turn a larger profit on sales to position from an economic fundamentals and at a lower cost
industrial clients such as the local affiliates of supply perspective to really feed into that oppor-
Arcelor Mittal (India), which account for more tunity,” she remarked. than USGC plants
than $450mn per year of its revenues. At the Bairstow does have an interest in highlight-
same time, it will be able to reduce the cost of ing the possibilities of the region, as MPL is
supplying gas to its TPPs, some of which have looking to build a 12mn tpy LNG plant in Puerto
been reliant on imported LNG, by more than Libertad, a city on the coast of Sonora State. The
$180mn per year. proposed facility would receive Permian gas via
cross-border pipeline and liquefy it for export.
“Far too anaemic” Even so, MPL is not the only company to take
As noted above, it was previously expected that notice of Mexico’s west coast. Sempra Energy
the expansion of pipeline capacity between hopes to convert an existing LNG regasification
Texas and Mexico would help alleviate the Per- terminal in Baja California State into an LNG
mian gas glut. Now, though, it looks like there production and export complex. The first phase
will not be a glut for some time – even though of this facility, which will be known as Energía
flaring could still be a problem in more remote Costa Azul (ECA), will be able to turn out 2.4mn
areas with limited access to gas-gathering and tpy of LNG, and its capacity may eventually rise
processing capacity. to 12mn tpy.
RBN noted that more than 4 bcf (113 mcm) Admittedly, this project is not progressing as
per day of new outbound pipeline capacity from quickly as Sempra might like, as Mexico’s gov-
the Permian to the Gulf Coast will be coming ernment has signalled that it may make approval
online next year. However, the consultancy also of the ECA project contingent on the construc-
warned that production growth in the basin tion of another LNG facility in Topolobampo in
would be “far too anaemic” to fill this new capac- Sinaloa State. Nevertheless, Sempra has already
ity. Indeed, the EIA is forecasting that total US signed non-binding supply agreements for
gas production will fall by almost 4 bcf per day 100% of ECA’s first-phase output. ™

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