Dallas News on Trans Pecos Pipeline

A surge in pipeline construction across the Texas-Mexico border is underway, to meet projections that the flow of U.S. natural gas to Mexico will almost double by the end of the decade.

Pipeline companies including Dallas-based Energy Transfer Partners and San Antonio’s Howard Energy Partners have announced hundreds of miles of new pipelines to deliver natural gas to power plants and industrial centers in Mexico. At the same time, Mexico’s state-run utility, Comisión Federal de Electricidad, announced plans last week to build a 500-mile underwater pipeline in the Gulf of Mexico, running from Brownsville to the Mexican port city of Tuxpan by 2018.

The pipelines will open Mexico to the flood of cheap natural gas coming out of Texas and other shale regions since the hydraulic fracturing boom began a decade ago. Exports are already rising and averaged 2.3 billion cubic feet a day through the first three months of 2015, according to the U.S. Energy Information Administration. The new projects are expected to increase that flow south to 4.3 billion cubic feet a day by 2020, according to projections by the energy research firm Wood MacKenzie.

Mexico “has announced about 1,000 miles of new pipeline. And there’s only about 9,000 miles of pipeline in all of Mexico,” said Howard Energy CEO Mike Howard, a former top executive at Energy Transfer. “It’s very rare in a career where you get to see demand increase two or three times from a single source.”

Driving the new construction are energy reforms undertaken by Mexican President Enrique Peña Nieto. He has opened up the country’s oil and natural gas reserves to foreign exploration companies for the first time in almost 80 years. At the same time, Peña Nieto is seeking to reduce the country’s historically high electricity costs by tapping into cheap U.S. natural gas.

Power plants currently fueled by oil are expected to be converted to run on natural gas and new plants will be built, said Amber McCullagh, an analyst at Wood Mackenzie.

By bringing down power costs, the government hopes to expand Mexico’s manufacturing and industrial sectors, which do not have access to the same government subsidies that households and farmers there rely upon, said Vicente Corta Fernández, an attorney in Mexico City with White & Case.

“We built these terminals on the Pacific and Atlantic, but it became very evident later on the shale gas revolution in the U.S. was going to create a surplus of cheap gas. Mexico is the natural market,” he said. “This should allow Mexico to join the energy revolution we’ve watched in the U.S.”

Full Story at Dallas News

Leave a Reply

Your email address will not be published. Required fields are marked *