New Perspectives on Energy Policy for Natural Gas Francisco Barnés de Castro November 13, 2012 Platts 16th Annual Meeting Houston, Texas
New Perspectives on Energy Policy for
Natural Gas
Francisco Barnés de Castro
November 13, 2012
Platts 16th Annual Meeting Houston, Texas
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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.
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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
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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.
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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
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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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Central Año Capacidad (MW)
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
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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Central Año Capacidad (MW)
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 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
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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Central Año Capacidad (MW)
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 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
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Chalenges for the next administration
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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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