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Nueva Era pipeline system begins commercial service, boosting US-to-Mexico gas supplies

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Nueva Era pipeline system begins commercial service, boosting US-to-Mexico gas supplies

Houston — The Nueva Era pipeline system, designed to deliver US natural gas tousers in and around Monterrey, Mexico, has entered commercial service following previous startup delays, co-owner Howard Energy Partners said Monday.

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Spokeswoman Natalie Tate said in an email responding to questions that the company plans to provide more information on the status of the project in the coming weeks.

The startup comes as Mexico increasingly relies on pipeline imports of US gas to backfill for declining domestic production and rising demand toserve power generation.

The Nueva Era system was initially expected to be placed in service in June 2017, but the date was pushed to December 31. In January, servicewas delayed until the third quarter of this year, which began Sunday.When it disclosed the most recent delay, the company said the new timing was in accordance with revised contractual timelines.

Howard's Impulsora Pipeline has an agreement with Mexico's state-ownedelectric utility to deliver gas from its Eagle Ford Gathering System inTexas. At the border, the gas will link up with a pipeline operated byMidstream de Mexico. Both pipelines are part of the Nueva Era system, ajoint venture of San Antonio-based Howard and Mexican energy firm GrupoClisa.

Initial flows will support the existing 670 MW Huinala power plant andwill also supply the 889 MW Escobedo power plant, which is expected to becompleted by the end of the year. CENACE data indicate that the Huinalapower plant produced nearly 3.8 TWh of electricity in 2017, implying autilization rate of around 65% and estimated daily gas demand of around80 MMcf/d.

Once online, the Escobedo power plant will potentially add another 110MMcf/d of demand on the pipeline, assuming a 70% utilization rate. US gas exports to Mexico averaged around 4.4 Bcf/d in June. S&P GlobalPlatts Analytics expects that US exports to Mexico will reach nearly 4.8Bcf/d in July, supported by several downstream expansions within Mexicoin addition to incremental border capacity additions.

The startup of the Topolobampo pipeline last month added roughly 40MMcf/d of downstream demand to the Oneok pipeline in West Texas, andPlatts Analytics estimates that flows could ramp up to around 100 MMcf/dlater this year. Tennessee Gas Pipeline is still awaiting FERC approvalto add another 387 MMcf/d of cross-border capacity at its two South Texasinterconnections, which could be placed into service imminently.

Besides fueling Mexican power plants, the Nueva Era system is considereda key element by Mexico 's independent gas system operator to establishMexico's first gas hub, providing the country its first price benchmark.A hub in Monterrey is expected to be in operation by summer 2019.

--Harry Weber, harry.weber@spglobal.com, and Ross Wyeno

--Edited by J. Robinson, newsdesk@spglobal.com