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Mexico's CFE withdraws from LNG supply, terminal auction

Highlights

Mexico state power utility CFE has withdrawn from an auction to procure LNG supply and a floating regasification and storage unit to serve southern Mexico, according to a Pemex official.

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The Mexican state oil and natural gas company had been a partner of CFE in the project. The Pemex official told S&P Global Platts on Monday that CFE would no longer be an anchor end-user in the project. However, the source said Pemex would continue with the auction via its gas marketing subsidiary Mex Gas Supply (MGS).

CFE was going to be a buyer, along Pemex, of LNG supply. Its absence means a decrease in the LNG volumes to be procured, according to the Pemex official.

The auction for the floating storage and regasification unit was expected to take place last December. Permitting delays held up the process, according to sources, and it now could be in service December 2018.



CFE previously said the LNG terminal auction was intended to ease supply gas shortages to Southern and Central Mexico until the construction of the 2.6 Bcf/d Sur de Texas-Tuxpan marine pipeline concludes in December.

Pemex hasn't released the participation rules of the auction, nor has it said what will be size of the LNG terminal or the expected volume of the supply agreement to be procured.

Pemex is planning to build a 390 MMcf/d interconnection between the FRSU in Pajaritos and the Sistrangas system, Cenagas said in March at its third annual update of its five-year plan for the country's natural gas infrastructure.

Pemex said on Monday that the state oil company is still evaluating the capacity of the LNG project.

David Rosales, technical director for the natural gas market with SENER, Mexico's Energy Secretariat, confirmed that CFE was withdrawing from the auction.

CFE could still be an occasional buyer of whatever fuel Pemex imports via the terminal like any other marketer in Mexico, Rosales said. This means Pemex's auction to secure LNG shipments will probably be smaller, he added.

"The main interested party of this LNG project is Pemex. They see it from an integral point of view of securing supply and better fuel quality for the market and its petrochemical installations," Rosales said.

The project will help to supply Mexico's southeast region as Pemex's domestic gas production is expected to continue decreasing in the coming years, he added. SENER forecast domestic gas feeding Sistrangas will fall to 893 MMcf/d by 2022, 43% less than in 2018.

The auction for the LNG terminals has been delayed by regulatory matters, Guillermo Turrent, the general director of CFEnergia, the marketing subsidiary of the state utility, told Platts last week.

Turrent said that if the regulatory delays continue, the project will become unattractive for CFEnergia as the LNG supply would compete against the CFE-sponsored Sur de Texas-Tuxpan pipeline. Gas from the pipeline would be less expensive than LNG.

The construction of the marine pipeline is on schedule, and it is expected to begin operations in December, Turrent said. Currently, Cenagas and CFE are building an interconnection between the marine pipeline and Sistrangas via Monte Grande, Veracruz.

--Daniel Rodriguez, newsdesk@spglobal.com

--Edited by Richard Rubin, newsdesk@spglobal.com