Interconnection: Sistrangas – Mayakan
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.
- 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).
- CFE holds 97% of Mayakan’s capacity, while other natural gas traders hold the remaining 3%.
- The pipeline starts in Nuevo Pemex, a Natural Gas Processing Plant (owned by Pemex), which is its sole supply source.
- 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.
- More supply is conditioned to a swap between Pemex and CFE.
- Gas quality supplied by Pemex frequently misses standards due to high Nitrogen concentrations.
HIGHLIGHTS FOR THE INTERCONNECTION
- Budget: Already authorized by the Ministry of Finance.
- Investment: Cenagas estimates it around 25 million dollars.
- Location: State of Chiapas
- Length: Approximately 16 kilometers (10 miles).
- Capacity: 1 billion cubic feet per day.
- Operations: The pipeline shall begin operations during the second semester of 2020.
- 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.
- The interconnection is subject to open access not unduly discriminatory.
- 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?
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.
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.
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.
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.