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Mexico's CFE and Pemex scrap gas swap plan to supply Yucatan Peninsula, now seek an FRSU tender

Highlights

CFE receives 60-80 MMcf/d of Pemex's gas at Yucatan Peninsula

FRSU could be installed at the ports of Progresso, Pajaritos or Seybaplaya

Mexico City β€” Mexico's state power utility CFE is exploring the possibility of contracting an FRSU to ensure gas supply in the Yucatan Peninsula in the short to medium term, Miguel Reyes, director of CFEnergia, said Tuesday.

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The plan to supply the Peninsula via gas swaps between state oil company Pemex and CFEnergia, CFE's fuel marketing arm, was scrapped, Reyes said in a press conference.

"Pemex's needs and priorities at the time are not over the swap, so it is off the table," Reyes said.

Now instead, both state companies along with the natural gas system operator are negotiating the rent of a floating, regasification, and storage unit, known as an FRSU, and hold consolidated LNG purchases, Reyes said.

At the sideline of the press conference, Reyes told S&P Global Platts that the three entities are evaluating whether to install the FRSU in the ports of Progresso, Seybaplaya or Pajaritos.

Under the previous administration of President Enrique Pena Nieto, Pemex had sought to auction the installation of an FRSU unit in the Port of Pajaritos as well as an LNG supply contract. However, the state company under President Andres Manuel Lopez Obrador canceled the tender in December.

The swap would exchange 240 MMcf/d of gas coming from TC Energy's 2.6 Bcf/d Sur de Texas-Tuxpan marine pipeline, known as STTP, with Pemex's production in its Southern Mexico processing plants.

Gas flowing via STTP cannot reach Southern Mexico due to a lack of compression capacity, making the plan not viable, Reyes said.

Currently, CFE is undergoing an arbitration process with TC Energy and its partner IEnova on force majeure contractual clauses and related fixed-capacity payments under such circumstances.

During the press conference, CFE General Director Manuel Bartlett said these negotiations would prevent the entrance in operation of STTP and other pipelines.

DIESEL TO FUEL MERIDA III

The Yucatan Peninsula is supplied via the 240 MMcf/d Mayakan pipeline, which sources gas from Pemex's gas processing centers in Tabasco State.

Mayakan is an isolated system disconnected from the rest of the country. Reyes said the entrance in operation of STTP would not solve gas shortages in the Peninsula.

According to Reyes, CFE's gas demand in the Yucatan Peninsula is 310 MMcf/d. However, it is currently receiving 60-80 MMcf/d from Pemex via a swap.

"What we are going to guarantee [gas supply] via this consolidated purchase, combining Pemex's needs and our own needs for the Peninsula for power generation," he added.

Meanwhile, to ensure power supply in the Yucatan Peninsula, CFE is supplying diesel to the Merida III combined-cycle gas turbine (CCGT) plant, allowing it to generate up to 440 MW, Carlos Morales Mar, CFE generation director, said at the conference.

Currently, Merida III is being supplied via trucks. However, the state utility expects to complete a fuel pipeline over the next month, ensuring a constant and reliable diesel supply into the facility, he added.

Meanwhile, the few gas deliveries CFE receives will be sent to the Valladolid CCGT plant, allowing it to generate up to 350 MW from this unit, Mar said

-- Daniel Rodriguez, daniel.rodriguez@spglobal.com

-- Edited by Pankti Mehta, newsdesk@spglobal.com