After decades of selling and transporting natural gas as a single, bundled service, Mexico's state-run petroleum company Petroleos Mexicanos has begun to separate out transportation as a distinct service with its own price, thus opening the country's gas market a step further.
Under a new permit issued on June 7 by the Comisión Reguladora de Energía (CRE), the government's energy commission, Pemex was formally granted a 30-year renewable permit to transport gas through its network of pipelines. In a sense, the permit puts Pemex on the same footing as the more than dozen private gas distributors and transporters that have been granted concessions by CRE for certain cities and regions.
"This new open-access will allow any user to decide to buy their own gas, at any injection point in the system or on the border, and transport it to their final destination on Pemex's system," said CRE Commissioner Raul Monteforte. He added that Pemex is obligated to transport gas for those requesting service and is unable to discriminate against any potential clients.
Currently, Pemex operates the only gas pipelines interconnecting to the U.S., but permits have been given for privately operated lines, including one being built by KN Energy Inc., Lakewood, Colo., between Monterrey and Ciudad Mier (OGJ, July 12, 1999, p. 34) and another by Sempra Energy International, San Diego, Calif., in Baja California (OGJ, Sept. 7, 1998, p. 42). Monteforte sees many more such pipelines being built in the near future. "The market in the north of Mexico is growing rapidly," he said. "Many industrial projects, urban (gas) distribution systems, and electric power plants depend on, or will depend on, gas."
How it works
CRE has set a ceiling on revenues from transportation costs for Pemex of $0.94/gigacalorie. This figure, called the P-0, is calculated by taking all the costs of operating the system-including investment, operating costs, taxes, and profits-divided by the volume. The P-0 for Pemex's permit is to be reviewed every 5 years and will be modified according to changing costs or volumes.
While the P-0 sets the maximum average revenue allowed by Pemex, clients may negotiate lower prices with Pemex based on volume. Pemex also may rebalance rates in certain instances, as long as the average of the rates remains below the P-0. CRE has not yet set the new rules for first-hand gas sales by Pemex to private buyers but is expected to in coming weeks.
The 8,704-km natural gas pipeline system, currently serving 1,094 customers, is divided into 19 zones, and transportation costs to individual customers will be based on the number of zones they are from the nearest injection point.
About 75% of the gas in Pemex's pipeline system is injected from Pemex's giant gas processing complexes at Nuevo Pemex and Cactus, in southeastern Mexico. The network then splits into two, with one subsystem covering central Mexico and the other extending north up the Gulf Coast to serve northeastern Mexico. Most of western Mexico remains unconnected to Pemex's network, although some towns in the far northwest are linked to the U.S. through Pemex pipelines.
As part of the new permit, Pemex has committed to invest $436.4 million during the next 5 years to overhaul the system and raise capacity from its current level of 4.824 bcfd to 5.259 bcfd. Pemex will also install and begin testing a scada monitoring system for the network by the end of this year.
Because the price for Pemex gas is based on Houston Ship Channel rates under a netback formula, CRE has also set the value of the netback in determining the first-hand price. During an initial 6-month transition period, the netback value between the Reynosa interconnection and Ciudad Pemex will be $1.49493/gigacalorie, and after that it will be $1.49027/gigacalorie. Because of the new netback calculation, the domestic gas price at Ciudad Pemex has dropped by 8%.