principales cambios al reglamento de gas natural

New Perspectives on Energy Policy for

Natural Gas

Francisco Barnés de Castro

November 13, 2012

Platts 16th Annual Meeting Houston, Texas

2

The long-term scenarios developed by major international agencies are coincident:

Fossil fuels will remain dominant for several decades

Renewable energy will play an increasingly important role.

The natural gas will play a fundamental role in the transition

The accident at the Fukushima nuclear plant has severely affected nuclear generation programs

The concept of energy efficiency is becoming more important every day.

Mexico will follow similar trends.

The global scenario remains practically unchanged

Growth in electric power demand

These scenarios assume a sharp increase in per capita electricity demand, which affects the natural gas consumption

In the next 30 years GDP per capita will double in industrialized countries and will increase 4 times in the emerging economies

High percentage of population will have access to modern energy sources

Increased electrification of homes and businesses.

A significant penetration of electric or rechargeable hybrid cars.

3

4

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

USD/MMBtu

Combustóleo Gas Natural Carbón Diesel

2006 2007 2008 2012 2009 2010 2011

2.94

3.70

16.64

19.61

USD

/MM

BTU

Relative price of fuels

Fuente: Subdirección de Energéticos CFE

Fuel oil Natural gas Coal

5

Growth of installed power capacity (new combined cycle capacity per region)

2012-2027

6

Growth of gas demand for power generation (pick demand per region)

2012-2027

NG prospective

According to the baseline scenario recently presented by SENER, natural gas demand will exceed domestic supply throughout the prospective period

7

Source: Prospectiva del Mercado de Gas Natural 2011 – 2026. SENER

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

OFERTA NACIONAL IMPORTACIONES DEMANDA

MMPCD

Underestimation of demand

It is possible that the demand for natural gas for power generation is underestimated:

The resumption of the nuclear program has been delayed again

CFE’s POISE includes 6.200 MW based on clean technologies yet to be defined.

Greater penetration of rechargeable hybrid and electric cars in private transportation and of compressed gas for public and cargo transportation is not considered.

Neither is the expected revival of the nitrogen fertilizer industry.

8

9

PEMEX (9,753Km) Private pipelines (2,225 Km)

Natural gas pipeline system (2012)

LNG

LNG

LNG LNG

LNG

LNG

PRIVATE PIPELINES

Kinder Morgan

Gasoductos de Chihuahua

Igasamex Bajío

Energía Mayakán

Tejas Gas de Toluca

FINSA Energéticos

Gasoductos del Bajío

Transportadora de Gas Natural

de Baja California

Gasoducto Rosarito

Gasoductos de Tamaulipas

Gasoductos del Río

Agua Prieta

Conceptos Energéticos Mexicanos

Transportadora La Huasteca

Energía Occidente de México

1 2 3 4 5 6 7 8

9 10 11 12 13 14 15

1

2

3

4 5

6

7

8 9

10 11

12

13

14

15

10

PEMEX pipelines with available capacity PEMEX pipelines operating at its limit Private pipelines

Existing infraestructure has serious limitations

LNG

LNG

LNG

Several pipelines have reached their capacity

LNG

LNG

LNG

Limited capacity Lack of

redundancy

Inertial planning

Gas demand requirements for power generation is crucial for the planning of new transport infrastructure of natural gas.

However, the planning scheme to develop the new infrastructure that followed by the Mexican government for many years was mainly inertial.

With rare exceptions (Tamazunchale and Manzanillo), CFE new plants were located where gas transport infrastructure already existed.

Pemex only planed expansions in order to supply the expected increase in demand.

The main driving force for gas demand is power generation.

Power plants location

In operation

Under construction

Planned

Policy and Regulatory Measures

Recognizing the competitive advantages of natural gas, a National Gas Strategy was implemented in 2011 by the Federal Government, which incorporated the following elements:

1. Expansion of transport infrastructure

Increase regional coverage

Eliminate bottlenecks in existing systems

Increase capacity of trans-border interconnections

2. New schemes for market development

Compressed gas

3. Development of new distribution systems

Accelerate the process to bid new distribution zones

The decision was taken to relocate several CFE projects for new generation plants (NGCC IPP’s) and to install dual burners in thermal plants operating with fuel oil. These changes allowed CFE to bid a series of pipelines to bring gas to the new locations.

Where CFE couldn't anchor the capacity for new pipelines, PEMEX Gas took the responsibility.

CRE established new regulations to incorporate the cost of the pipelines anchored by PEMEX Gas to the general tariffs of the National Pipeline System operated by PEMEX.

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CD.JUAREZ

TORREON

CHIHUAHUA

EST. CHAVEZ

LAGUNA DEL REY

CAMARGO

DELICIAS

DURANGO

MONCLOVA

GLORIA A DIOS

Propuestas

Central Año Capacidad (MW)

CT Francisco Villa 390 300

CT Samalayuca I 450

CC Samalayuca II 506

TG El Encino* 131

CC Gómez Palacio 200 240

CC Chihuahua II* 438

CC Norte 2010 470 466**

CC Chihuahua III 2001 259

CC La Laguna II 2001 498

CC Norte II 2013 458 459

CC Norte III 2015 954

CC Norte IV 2018 2019

918

CC Norte V 2020 2021

944

Relocation of current and future CFE´s power plants in the northern area

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* Presented as El Encino (Chihuahua II) con 619 MW

** Table: Proyectos de generación diferidos POISE 2009 vs 2010

Source: POISE 2012 – 2026

New CCGT

IPPs

CFE

Private Pipelines

PEMEX Pipelines

New Pipelines

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The new pipelines will supply the conventional thermal power plants of Puerto Libertad, Guaymas, Topolobampo and Mazatlan. that will be converted to use natural gas instead of fuel oil.

It will also support the installation of sevral new plants: Guaymas II and III, II and III Topolobampo, Mazatlan, and North II, III, IV, V and VI, as well as El Encino.

New pipelines in the northwestern area

Pipeline Length (KM)

Diam (in)

Ruta 1

San Isidro-Chihuahua

351.5 42

Chihuahua-Jiménez

220 36

Jiménez-Topolobampo

600 30

Ruta 2

Sásabe-Puerto Libertad

235 36

Puerto Libertad-Guaymas

300 30

Guaymas-Topolobampo

385 30

Topolobampo-Mazatlán

405 24

16

New pipelines in the northwestern area

NVO. TEAPA

T. BLANCA

CD. MENDOZA

PUNTA DE PIEDRA

CD.JUAREZ

PUEBLA

REYNOSA

SAN LUIS POTOSI

GUADALAJARA SALAMANCA

QRO.

TOLUCA

LÁZARO CÁRDENAS

URUAPAN NVA. ITALIA

TLAX.

MINATITLAN

HUIMILPAN TAMAZUN.

NARANJOS. AGUASCALIENTES

MANZANILLO

Nuevos Ductos

Relocation of CFE´s power plants in the central and central-west areas

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Salamanca - Fase I 2013 470

Valle de México II 2013 2017

601

Jorge Luque Fase I 2015 2020

600 601

Occidental I 2015 2018

470

Occidental II 2016 2021

470

Salamanca Fase II 2017 629

Valle de México III 2018 2019

601

Jorge Luque Fase II* 2018 600

Valle de México IV* 2020 600

Occidental III 2023 2026

940

Central I (Tula) 2021 1,160

Central II (Tula) 2023 2024

1,160

Source: POISE 2012 – 2026

Private Pipelines

PEMEX pipelines

IPP’s

CFE

New CCGT

New pipelines

LNG

NVO. TEAPA

T. BLANCA

CD. MENDOZA

PUNTA DE PIEDRA

CD.JUAREZ

PUEBLA

REYNOSA

SAN LUIS POTOSI


QRO.

TOLUCA

LÁZARO CÁRDENAS

URUAPAN NVA. ITALIA

TLAX.

MINATITLAN

HUIMILPAN TAMAZUN.


MANZANILLO

Nuevos Ductos


18




601


600 601


470


470



601




940



1,160

Source: POISE 2012 – 2026 LNG

Private Pipelines

PEMEX pipelines

IPP’s

CFE

New CCGT

New pipelines

NVO. TEAPA

T. BLANCA

CD. MENDOZA

PUNTA DE PIEDRA

CD.JUAREZ

PUEBLA

REYNOSA

SAN LUIS POTOSI


QRO.

TOLUCA

LÁZARO CÁRDENAS

URUAPAN NVA. ITALIA

TLAX.

MINATITLAN

HUIMILPAN TAMAZUN.


MANZANILLO

Nuevos Ductos


19




601


600 601


470


470



601




940



1,160

Source: POISE 2012 – 2026 LNG

Private Pipelines

PEMEX pipelines

IPP’s

CFE

New CCGT

New pipelines

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Natural Gas Infrastructure Outlook in 2017

Planned pipelines

1. Tamazunchale - El Sauz 2. Morelos 3. Aguascalientes -Zacatecas 4. San Isidro - El Encino 5. Sasabe - Puerto Libertad – Guaymas 6. Guaymas – Topolobampo 7. Topolobampo -Mazatlán 8. Chihuahua-Topolobampo 9. Cactus - Cd.Pemex 10. Frontera - Los Ramones - San Luis

de la Paz -Aguascalientes 11. Nuevo Pemex-Salina Cruz

Existing PEMEX pipelines Existing private pipelines

1

2 9

11

4

Compression stations

A. EC Omealca

B. EC Golfo

C. EC San Rafael

3

C

B

A

5

LNG

LNG

LNG

A

7

6

8

LNG

LNG

LNG

10

CFE PEMEX

Increase natural gas production

Establish the bases for the efficient development of trading companies

Guaranty effective open access conditions in the National Transport System operated by PEMEX

Implement regulation for capacity reservation in the National Transport System

Accelerate the development of new infrastructure for transport, storage and distribution of natural gas

21

Chalenges for the next administration

22

Strategies to increment gas production

Gas flare reduction: In the last 2 years, there was an average reduction of 225 MMPCD per year.

Coal gas: It is possible to produce up to 580 MMCFD per year.

Shale gas: PEMEX plans to produce 3,300 MMCFD in 2026.

Fuente: SENER; “Nuevo Marco Institucional para el Gas Natural”; Acapulco, Gro. 25 Mayo 2012

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Shale gas production in Mexico

To achieve the previously stated goal, it will be necessary for PEMEX to undertake an intensive exploratory effort and to be able to allocate 3,000 million dollars of investment in the next four years.

For a program of such magnitude it is indispensable yo modify present conditions in order to:

Update the existing legal framework to incorporate shale gas.

Modify the fiscal regime.

Accelerate the acquisition of exploratory information to validate assumptions and reduce the level of uncertainty.

Insure an adequate level of funding for drilling the large number of exploratory and production wells that will be necessary to attain the desired level of production.

Potentiate PEMEX own capabilities by incorporating new schemes for private participation.

Natural gas trading

The activity of trading natural gas is not reserved to the State or regulated by CRE.

This activity has not been developed in Mexico due to several factors:

PEMEX exercises a monopolistic power as the sole supplier of domestic NG.

An almost monopolistic position to purchase gas in the United States has been established by MGI, a trading subsidiary of PEMEX.

PEMEX has a clear advantage acting as a trader, thanks to its vertical integration with the National Transportation System

The monopsonic power of CFE, which acquires its gas through PEMEX or through long-term contracts for LNG

It is imperative to define the role of PEMEX and CFE in the commercialization of natural gas so that the development of gas traders other than PEMEX is no longer inhibited.

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Open Access

In a competitive market, open access to the infrastructure of transportation, storage and distribution must be ensured to end users and trading companies

It is essential to have a sharp and clear legal, operational and accounting separation between regulated transportation companies and traders.

For these reasons, it is imperative to achieve a clear and transparent separation between hand sales of natural gas produced by PEMEX as a State monopoly, the administration of PEMEX pipeline network, and PEMEX participation as a natural gas trader.

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Efficient use of network

The efficient use of the National Gas System network operated by PEMEX requires the promptly implementation of the regulatory regime that requires users to reserve capacity.

This is essential to properly program the efficient use of the existing network and to generate the right incentives for future expansions.

More efficient use of the network will imply lower rates.

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Network Expansion

It is necessary to relaunch as soon as possible the bid for the Frontera - Los Ramones – San Luis de la Paz pipeline to eliminate the existing bottlenecks and to be able to satisfy the expected growth in demand in the Central and Occidental Regions.

It is important to develop an underground storage capability on the Gulf Coast in order to have flexibility to cope with unexpected situations and to minimize the risk of critical alerts.

It is essential to develop a new strategic plan to install on time the infrastructure that will be required to satisfy future demand and to provide service to those regions that cannot be attended today.

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Conclusions

An efficient and timely satisfaction of natural gas demand is an essential condition for the economic development of Mexico

The intelligent and articulated development of a robust transport infrastructure for natural gas will allow a smoother and orderly energy transition towards sustainable development, at a lower cost

It will have additional benefits in terms of attaining a more balanced regional development

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Thank you

www.cre.gob.mx

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principales cambios al reglamento de gas natural

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