Talanza Energy Consulting

November, 2019

Interconnection: Sistrangas – Mayakan

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On November 15, Cenagas’ General Director, Elvira Daniel Kabbaz, announced the development of a natural  gas pipeline that will connect Sistrangas (managed by Cenagas) to the Mayakan pipeline (Engie); this project  will allow gas from the Gulf of Mexico to reach the Yucatan Peninsula.

This interconnection will be the fist bidding project for transport pipelines carried out by Cenagas. In this  document, Talanza Energy reviews how the open season process should take place, according to applicable  regulations and expected priorities and benefits for the final users.

BACKGROUND

  1. Mayakan pipeline has operated since 1999, with a length of 780 kilometers (672 miles) and a capacity  of 250 million cubic feet per day (mmcfd).
  2. CFE holds 97% of Mayakan’s capacity, while other natural gas traders hold the remaining 3%.
  3. The pipeline starts in Nuevo Pemex, a Natural Gas Processing Plant (owned by Pemex), which is its  sole supply source.
  4. The declining on natural gas national production  has affected the supply to Mayakan. On average,  Pemex supplied 70-90 mmcfd during 2019, barely  enough for CFE to meet its demand for electric.
  5. More supply is conditioned to a swap between  Pemex and CFE.
  6. Gas quality supplied by Pemex frequently misses  standards due to high Nitrogen concentrations.

HIGHLIGHTS FOR THE INTERCONNECTION

  1. Budget: Already authorized by the Ministry of Finance.
  2. Investment: Cenagas estimates it around 25 million dollars.
  3. Location: State of Chiapas
  4. Length: Approximately 16 kilometers (10 miles).
  5. Capacity: 1 billion cubic feet per day.
  6. Operations: The pipeline shall begin operations during the second semester of 2020.

RELEVANT CONSIDERATIONS

  1. The functionality of the interconnection depends on the completion and full operation of the adjust-  ments to Cempoala Compression Station, that will allow for gas to flow from the North to the South  of the Gulf of Mexico, and then to de Peninsula of Yucatan. The completion of this project is expected  for the first semester of 2020.
  2. The interconnection is subject to open access not unduly discriminatory.
  3. Cenagas will have a new transport route, creating new capacity flowing from the “48’ pipeline” to the  start of Mayakan. This route should go through an open season process.

WHAT SHOULD THE MARKET REVIEW?

Supply
Big question: Will the interconnection be  sufficient for the Peninsula? When a  bottleneck is solved, the major pending  issue could be the supply.
This project opens opportunities for  traders to reserve capacity from  different sources, including gas flowing  from the South of Texas
– Tuxpan pipeline. 
Negotiations with CFE and Pemex should  come soon.

Demand
Current electrical demand is about 200  mmcfd, while the industry needs are  limited to barely 10 mmpcdf.
The President of Mexico and CFE  announced interest on a new CC  generation plant (70 mmcfd), industrial  unattended demand could reach up to 50  mmcfd just by the end of this  administration. Conversion from other  fuels (LPG, gasoline and diesel) will  depend on prompt interest of  distributors to tackle those markets.

Prices comparison

Market participants -end users,  distributors, transporters, traders, and  suppliers- should understand all possible  implications of this interconnection from  their respective position, to take make  the most of this opportunity and to  prevent risks on their ventures.

In Talanza, we have successfully advised interested  firms in business opportunities by giving analysis of  supply, potential demand, logistics availability, and  providing a regulatory compliance plan for energy  projects.

Analysts

Daniela Flores

Daniela Flores oversees the tailoring of midstream and downstream regulatory compliance schemes. Her areas or expertise include analysis of natural gas and liquids markets as well as first-hand experience on the implementation of procedures to guarantee not only regulatory compliance but also assure supply, demand and infrastructure review for a comprehensive advice in each of our clients' energy projects.