Several new pipeline systems designed to move US natural gas supplies toMexican demand centers could add up to 4.8 Bcf/d of US export capacity intoMexico by 2015, Goldman Sachs said in a report released Friday.
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The increasing exports will continue to help reduce the oversupply ofnatural gas in the United States going forward, the report said.
US exports into Mexico have been growing in recent years in response toa boost in Mexican demand spurred by economic growth and increased gas-firedpower generation.
In terms of US/Mexico cross-border points, existing capacity is close to3 Bcf/d for flows into Mexico, according to the Mexican government'sSecretaria de Energia, the report said.
Close to 1.6 Bcf/d of the capacity is in South Texas, another 800,000Mcf/d is in southern California, with the rest split between Arizona at400,000 Mcf/d and West Texas at 200,000 Mcf/d.
However, actual flows from the US into Mexico averaged just 1.7 Bcf/d in2012, in part because of constraints on the Mexican side of the border,Goldman Sachs said.
Three major pipeline projects south of the border approved by theMexican government will allow more gas to reach downstream demand centers.
"There are now several pipeline and compressor station projectsscheduled in Mexico to handle increased imports and pass the natural gasalong to end consumers," the report said.
One of the new systems -- the Northwest pipeline system -- includesseveral projects including the Mazatlan Pipeline, which will begin at El Oroand end in Mazatlan, in the state of Sinaloa. Calgary-based TransCanada wasawarded the contract to build and operate the Mazatlan pipeline, as well asthe Topolobampo Pipeline, which will stretch from El Encino in the state ofChihuahua to Topolobampo in Sinaloa on the Pacific Coast.
Another part of the Northwest system was awarded to Sempra, which willbuild a pipe from Sasabe, Arizona, to the Pacific Coast port of Guaymas inSonora.
The first phase of this system, to be built by Sempra, will come onlinein late 2014 with a capacity of 770,000 Mcf/d. The second phase, also builtby Sempra, is slated for 2016 with a capacity of 510,000 Mcf/d. The third andfourth phases, of which TransCanada is responsible for, are also set to gointo service in 2016. The capacities are 670,000 Mcf/d and 202,000 Mcf/d,respectively.
Another major new system is the Los Ramones pipeline, which stretchesthrough several Mexican states including Tamaulipas, Nuevo Leon, San LuisPotosi, Guanajuato, Queretaro and Zacatecas. The first phase of this systemis slated to go into service in late 2014 with the second phase in 2015, for acombined capacity of 2.1 Bcf/d.
The third new pipeline system in Mexico is the 850,000 Mcf/d Chihuahuapipeline, which will move gas from Ciudad Juarez to El Encino, both of whichare in the state of Chihuahua. It has an estimated start-up date this summer.
In addition, several other pipeline project expansions on the US sideare underway to increase capacity to Mexico including several on KinderMorgan's El Paso pipeline system.
Mexican natural gas demand will likely continue to grow, underpinned bysolid real GDP growth of 3.6% and 3.8% year-on-year in 2013 and 2014, as perGoldman Sachs estimates.
In the power generation sector, four more gas-fired power plants arescheduled to start in 2013 according the Mexican state utility CFE, with acombined capacity of 1.8 GW, roughly equivalent to 300,000 Mcf/d of gasdemand, Goldman Sachs said.
Despite the jump in demand, Mexican production of gas has been more orless flat, as Mexican state oil and gas monopoly Pemex has focused on oilproduction.
As a result, imports from the United States have helped fill the gapsand will continue to do so, the report said.
In addition, Goldman Sachs said some of the increased need for naturalgas in Mexico could potentially be met by liquefied natural gas imports intoMexico's three terminals at Manzanillo, Altamira and Ensenada/Costa Azul.
However, oil-indexed LNG prices are around four times higher than US gasprices, and spot LNG prices are even higher, the report said. "Mexico'sappetite for LNG was low in 2012 despite growing demand for natural gas, andwe expect this to remain the case in 2013-2014."
--Eunice Bridges, firstname.lastname@example.org
--Edited by Carla Bass, email@example.com