Gas-demand growth will push expansion in Mexican transmission infrastructure

This means that national production of natural gas must grow almost twofold to keep imports in check, while new pipelines and cross-border interconnects must be built. Adequate reserve and infrastructure development for natural gas is essential for Mexico's energy future.

Supply, demand assumptions

Hefty demand of natural gas for power generation, coupled with sustained growth in gas use by industry and local distribution customers, as well as structural changes in the Mexican economy, have driven gasification since 1995. Not only will these forces not stop, but they will also become stronger in the years ahead.

Thus adequate reserve and infrastructure development is urgently needed: No less than 6 bcfd of dry gas must be produced internally in order to keep imports to less than 2 bcfd (Fig. 1). Given the uncertainties regarding national production and imports of natural gas, alternatives under evaluation by the federal government include different sources for imported gas (viz. cross-border pipelines or LNG) and new schemes for private participation in gas production.

Gas substitution in electricity generation (e.g., with fuel oil) and energy savings are also options, although the former would have environmental consequences.

Figs. 2 and 3 are already based on more conservative growth scenarios than recent assessments by Mexican energy authorities. The difference is also explained by the fact that only the demand for dry natural gas is considered, i.e. after processing.

Estimating total gas flows and requirements in the Mexican gas system is difficult enough, as is illustrated in Table 1 with recent data from Petróleos Mexicanos (Pemex). Likewise, gas demand from power plants in the isolated northwest could be larger than expected.

The purpose of the scenarios shown in the previous figures, however, is only to provide a realistic quantitative platform to run the SynerGee 3.2 model developed by the Energy Regulatory Commission (CRE) and not to argue against any official forecast or to be absolutely precise in the forecast-an idle exercise in itself.¹

Still, the assumptions made in our analysis imply that national supply of dry natural gas should increase from 3.8 bcfd in 2000 to at least 6.4 bcfd in 2010; between $15 and $18 billion must be invested in exploration and development of natural gas during the same period to reach that goal.

During that period, 1 bcfd of additional gas processing capacity must be in operation, gas flaring should be reduced to a technical minimum (from an average of 300-350 MMcfd between 2000 and 2001),² and cross-border pipelines and LNG import plants may be required to handle up to 2 bcfd of natural gas imports into Mexico by 2010.

The national pipeline system will have to be reinforced with incremental compression, pipeline replacement, looping, and new pipelines in order to handle a total flow of at least 8 bcfd in 2010. Storage will be needed as line pack management in the national pipeline system-used now in lieu of storage-becomes exhausted.

To assess the production and infrastructure requirements in Mexico to 2010, as the basis for the SynerGee model, the assumptions shown in Figs. 1, 2, and 3 are used both for running a base-case model and future scenarios, whereby sensitivity to different factors is tested (e.g., capacity bottlenecks, off-take increments, pressure drop on specific segments, lack of compression at a certain date, etc.).

The SynerGee model is thus a valuable tool to identify and evaluate capacity and flow requirements in pipelines, storage, and LNG regasification plants in Mexico.

Assessment

Existing production infrastructure can produce about 4.5 bcfd. The amount of natural gas available for injection into the pipeline system (dry or pipeline-quality gas) was about 3.7 bcfd in 2000 and 3.9 bcfd in 2001, indicating that Pemex's own use, exchanges, and flaring remain significant.³

In principle, under normal flow conditions and with Panhandle B equation, the pipeline system can handle 5.4 bcfd (i.e., pipeline capacity),⁴ but there are conspicuous operating restrictions on the maximum flow in the system, as will be illustrated presently.

Total compression capacity in the pipeline system stands at 100,866 hp, assuming that operating pressure is the result of optimum unit performance; that is, that both turbo compressors and reciprocating units are working within the boundaries of their respective performance curves.

Maximum allowable operating pressure is considered segment-by-segment as stated in the transmission permit for Pemex Gas y Petroquímica Básica (PGPB), especially as it relates to pipeline class location.⁵ Pressure deficiency in the northeast, however, flow restrictions on several pipeline system segments, variability of Pemex's own use (e.g., pneumatic pumping), and pressure drop downstream of the Central Zone often violate SynerGee's conditions for system viability.

In the case of western zones, virtual injection points are assumed in order to represent linepack management by PGPB, given that line pack may be calculated as 5 bcf. But the system lacks storage, functioning itself for that purpose and thus generating very large daily linepack variations.

Fig. 4 shows the current situation of energy corridors along the US-Mexican border.6 The figure also shows existing nominal (i.e., not fully available) capacity as of 2001, both for gas transmission and power.

Excluded are capacity under construction and foreseeable expansions.

Today import points can effectively handle much less than 1 bcfd; for example, capacity on the Reynosa-Arguelles points is constrained for different reasons. In some cases, the only available service is interruptible, and additional investments on the US side (e.g., incremental compression) would be required. Currently, 500 MMcfd of new capacity in cross-border pipelines (e.g., Blythe-Yuma-Tijuana is 400 MMcfd) is under construction, while compression projects and interconnect modifications are ongoing on El Paso Natural Gas' system at Wilcox, Ariz., and Hueco, Tex.

The pipeline system is balanced for the base case, given the assumptions presented in Figs. 1, 2, and 3 and considering capacity and pressure parameters indicated in Fig. 5.

The system is extremely sensitive to minor changes in the assumed parameters, however, thus reflecting its inflexible operation today. If flows and operating conditions change in order to meet the 2005 natural gas requirement, the model becomes unviable (Fig. 6). The following bottlenecks are identified:

• Given growing gas imports, more pressure and capacity are required at the northeast import points. This depends on incremental investments on the US side.
• The Reynosa-Estacion 19 segment is constrained by MAOP due to urban sprawl around Reynosa. Most imports would have to enter through the Arguelles point or another border crossing carrying at least 900 psig.
• Sufficient injection pressure from Pemex's gas processing center in Reynosa is difficult to achieve. In order to handle more output from the Burgos basin, a new cryogenic unit would have to be built and obtain injection pressure of 900 psig.
• West of Monterrey city, along the 24 and 16-in. pipelines, the system shows negative pressures due to compression deficiency.
• There is no capacity available to serve new power plants in the Rio Bravo area (east of Reynosa); hence a new pipeline is needed.
• West of Mexico City, pressure drops significantly and the system weakens with distance. (Pressure becomes negative at the weakest points in Guadalajara and Lázaro Cárdenas nodes.)

As the maximum flow increases to 2010, the insufficiency of the system becomes critical. National injection is insufficient; nor can the national pipeline system handle the maximum flow of 8 bcfd at the required pressure, gas velocity, and other operating conditions (e.g., sonic limit of valves and regulators).

These conditions are essential for the proper functioning of the transmission system and for delivering the required volumes to the 170 nodes considered by the model (Fig. 7).

In the worst case, the entire northeastern segment is unviable including Monterrey city and power plants in Saltillo and Torreón; the Río Bravo, Altamira, and Tuxpan areas cannot be served; western areas cannot obtain firm deliveries at the required pressure; and there is no cushion in the system for linepack management.

Radical modifications and substantial capacity increments must be performed on the system, storage is required, and more volume must be injected from a viable source.

Future infrastructure

With the SynerGee 3.2 model, different sensitivities are tested and overall optimization of the system is attempted, assuming the growth scenarios previously discussed.

Handling 8 bcfd and serving 18 Gw of gas-based power plants, as well as local distribution demand of 300 MMcfd, require the following (Fig. 8):

• Three new border crossings in the northeast are necessary so that total firm transmission capacity in that area is at least 1.5 bcfd. The Arguelles import point will have to expand into a header system.

In particular, a new 30-in. border crossing linking South Texas (Bob West) and Monterrey city would be required with at least 300 MMcfd capacity. Eventually, an extension of this pipeline could reach central Mexico as a backup to the national pipeline system's main trunkline. With no backup today, the system is extremely vulnerable.

• Altogether, eight new border crossings are anticipated, with total capacity of 3 bcfd.
• An entire sub-system (30 in.) in the Rio Bravo area would have to link South Texas and northeastern power-generation clusters in Mexico. This will de-bottleneck the Reynosa-Estacion 19-Ramones-Monterrey-West path.
• Incremental compression in the north is necessary to serve the Chihuahua power plants and local distribution. In the opposite direction, more compression west of Monterrey is needed to serve power plants in Saltillo and La Laguna. Flows from the northeast and from the north will meet in southern Chihuahua.
• A new pipeline from the Gulf of Mexico to the west will serve power plants in the north-central region and alleviate bottlenecks on the eastern side of the national pipeline system serving central Mexico.
• New pipelines will connect load centers in central Mexico (Toluca and Cuernavaca cities), demanding enough pressure at their respective interconnection points.
• Loads in the far south (Yucatán) will increase and be served from southern injections by incremental compression on the Mayakan pipeline, operated by Gaz de France).
• Storage will be required in the south and north to operate the system reliably.
• LNG import plants on the east and west coasts, connected with the national system, will reduce injection requirements at Ciudad Pemex and Cactus (south) and reduce import dependence from South Texas.

The corresponding decisions will be highly commercial and strategic for Mexico. On the west, LNG will reverse the flow on the national system, liberating compression and capacity requirements along the 42-48 in. eastern trunkline. On the northwest, LNG will further energy integration between Baja California and California.

Safety on the national pipeline system will become a major focus of concern, as incremental compression generally will be added to pipelines with more than 25 years in operation. Wherever possible, new pipelines are better and safer.

Depending on actions and investments made between now and 2010, including LNG plants, new pipelines, storage, and new schemes for private participation in gas production, Mexico could adequately strengthen its infrastructure and become generally self-sufficient in natural gas for the mid-term, helping the country in the very difficult energy transition that lies ahead.

Acknowledgment

The author thanks Luz María Damián, CRE advisor and expert SynerGee 3.2 modeler, and Alberto Escalera, former CRE advisor and current operations director for El Paso Energy in Mexico, for their assistance in preparing this article.

References

1. Sener, Prospectiva del Mercado de Gas Natural 2000-2010, Secretaría de Energía, Mexico, 2001; Sener, Programa Sectorial de Energía 2001-2006, Secretaría de Energía, Mexico, 2001. Opponents of energy reforms in Mexico entertain themselves by disputing official forecasts and rejoicing at economic slump because it means less energy demand, hence supposedly less pressure to implement structural reforms.
2. Petróleos Mexicanos, Memoria de Labores 2000, México, 2000.
3. Pemex Exploración y Producción (PEP), Official communication to the CRE, Dec. 12, 2001.
4. Raúl Monteforte, "La CRE de México y una subsidiaria de Pemex llegan a un acuerdo de transporte," Oil & Gas Journal Latinoamérica, Noviembre-Diciembre, 1999, Vol. 5, No. 6, pp. 21-25.
5. CRE, PGPB National Pipeline System Transmission Permit, 1999.
6. The concept of "energy corridors" was illustrated recently in a seminal presentation by Enrique Velazco-Ibarra, "US-Mexico Gas & Power Integration," Houston, Nov. 2, 2001. It was first used, however, by the CRE and the Texas Railroad Commission in their collaborative work to foster cross-border energy infrastructure and information exchange between the two commissions.

The author

Raúl Monteforte is a commissioner in Mexico's CRE, having been recently appointed by Mexico's Pres. Vicente Fox for a second 5-year term. He chairs the National Consulting Committee of Technical Standards for Natural Gas and LPG. Monteforte has been a professor and researcher at the National Autonomous University of M