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Mexico gas pipeline capacity offer beats forecast

14 Mar 2017, 8.18 pm GMT

Mexico gas pipeline capacity offer beats forecast

Mexico City, 14 March (Argus) — Mexico's long-awaited first open season for natural gas pipeline capacity attracted a higher-than-expected turnout of 24 bidders.

Gas pipeline administrator Cenagas received a total of 759 bids for 2.7mn GJ/d (2.6bn cf/d) of available capacity. The bids totaled 3.5mn GJ/d, exceeding the availability by 30pc.

The bidders include Shell Trading and Eco Gas Mexico, a subsidiary of US Sempra´s Mexican unit IEnova.

Cenagas technical management and planning director Eduardo Prud'homme previously told Argus that just six or seven gas supply companies were likely to participate in the open season because of uncertainty about how the process would work.

Other participants include Monterrey-based local company Compañía Mexicana del Gas, state-owned Pemex Transformación Industrial, Australia's Macquarie Energy Mexico and White Eagle Mexico.

Pemex and state-owned utility CFE have been allocated 32pc of the national pipeline system's 6.2bn cf/d (62bn m³/yr) of capacity, while existing independent power producers have been assigned 1.7bn cf/d. This left 2.6bn cf/d for the open season.

The available capacity was adjusted prior to the launch of the open season, reducing Pemex and CFE's allocation to make more available for the private sector.

The initial bidding round closed on 10 March, and average price bids will be published on 21 March, after which participants have between 27 March and 7 April to submit counter bids.

The winners will be notified on 8 May and one-year contracts for the reservation of capacity will be signed between 22 May and 16 June, with reserved capacity available from 1 July.

The short one-year duration of the contract had been viewed as one of the main impediments to participation, industry participants had said. But the brisk outcome suggested that it was not enough to dissuade bidders.

The year-long contract was a deliberate strategy on the part of Cenagas to use this first open season as a transition and a learning experience, Prud'homme has said.

A second open season, to be held next year, will offer longer and more flexible contracts.

The open season is the latest development in the liberalization of the gas market following Mexico's 2014 energy reform that ended Pemex's monopoly.

On 1 February Mexico's energy regulator CRE launched the first phase of a contract migration process that will see 20pc of the current volume of gas contracts held by Pemex's downstream unit transferred to private-sector companies. And on 17 February Cenagas concluded its first annual auction for capacity on import pipelines.

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