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Analysis: Sur de Texas record exports point to downstream testing in Mexico

New York — Record-high volumes on the Sur de Texas-Tuxpan Pipeline this month suggest that testing may have already begun on the Cempoala Phase II compressor station reversal – a key downstream infrastructure project that has promised to significantly expand Mexico's demand for US gas by the end of this quarter.

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On February 15, receipts on Sur de Texas reached their highest yet at 950 MMcf/d, data compiled by S&P Global Platts Analytics shows.

The new high was accompanied by a corresponding record delivery volume of nearly 200 MMcf/d to the pipeline's Monte Grande interconnect to Mexico's national pipeline grid in Vera Cruz state.

In the 10 days since, deliveries to Monte Grande have backed off, averaging just 143 MMcf/d. Since the start of this year, though, a steady increase in transmission volumes through Monte Grande suggests that grid operator Cenagas could be preparing for a significant increase in gas imports from the US.

CEMPOALA PHASE II

Gas imported on Sur de Texas pipeline currently has access to at least three sources of demand.

At Altamira, the steady displacement of LNG imports since November has seen deliveries to the Altamira V power plant continue to build this year.

At Naranjos, an interconnection to TC Energy's Tamazunchale Pipeline has allowed imported US gas to flow west and south to the interior states of Hidalgo and Querétaro.

At the Monte Grande interconnect, Sur de Texas volumes have also delivered to the Sistrangas national grid (SNG), supplying local and regional demand in the Tuxpan metro-area.

A fourth source of demand for Sur de Texas imports will come from the Cempoala Phase II compressor station reversal – a project currently under construction, downstream from the Monte Grande interconnect. According to Platts Analytics, the completed project will provide as much as 1.3 Bcf/d of total southbound capacity on the SNG pipeline through Veracruz State.

For Sur de Texas, the project's startup could see southbound volumes flowing through Monte Grande rise by some 300 to 400 MMcf/d.

With SNG volumes also capable of flowing southbound through Cempoala, a startup at the reconfigured compressor will likely pull gas from NET Mexico too, boosting US exports by another 300 MMcf/d.

The total supply change this year-to-date versus the same period in 2019 across the NET Mexico pipeline, Altamira LNG, and Sur de Texas, is an increase of 300 MMcf/d. The incremental gas has found a home on TC Energy's Tamazunchale Pipeline at Naranjos for an increase of 100 MMcf/d.

The rest of the supply increase, 200 MMcf/d, has occurred at the Altamira III, IV, and V power plants.

OUTLOOK

The combined impact of the Cempoala compressor reversal could boost US exports by as much as 700 MMcf/d, according to Platts Analytics.

In early February, Fermaca confirmed with Platts Analytics that the last segment of the Wahalajara pipeline system, Villa de Reyes – Aguascalientes – Guadalajara, will be completed in March 2020. Platts Analytics estimates that Wahalajara will also increase US pipeline exports by nearly 400 MMcf/d, partially displacing Manzanillo LNG imports.

In February, US pipeline exports to Mexico have averaged 5.2 Bcf/d. Current forecasts show that by April, total exports could climb to nearly 5.7 Bcf/d and potentially reach 6.3 Bcf/d by the peak-demand month of August.