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Competitive US shale gas favor Pemex pipelines projects to Mexico

Pemex to import natural gas from Eagle Ford shale field

The Mexican national oil company Petroleos Mexicanos (Pemex), through its international gas trading division MexGas International (MGI), is pursuing several pipelines projects to import natural gas from USA.

In Mexico as in other countries, the price of the natural gas is a key driver of the performances of the local industry.

With the prices depressing in the neighboring USA, Mexico had to do the same to preserve its economy.

But the actual gas market prices in USA issued from the massive shale gas exploration and production are far below Pemex costs.

In this context Pemex natural production is slightly declining from 7 billion cf/d in 2010, to 6.4 billion cf/d actually.

Pemex is not motivated to invest in what it considers as a non profitable business while the US Energy Information Administration (EIA) estimates Mexico among the top five countries by the largest shale gas deposit after China and USA.

In front of the stagnation of the production the demand is surging as in the emerging countries either to feed the power generation plants, either to provide the petrochemical industry with a competitive feedstock.

To compensate the lack of local production to meet the domestic demand, Pemex is investigating all the alternative sources of supply in beginning with the USA where the natural gas is cheap and abundant.

Los Ramones pipeline to link Texas to Central Mexico

Among the projected solutions, Pemex is working on a natural gas pipeline from the South Texas to Central Mexico.

Starting at the US/Mexican border in  southern Texas, the pipeline would take 1000 kilometers length to deliver natural gas in central Mexico.

The first section should be originated from the Agua Dulce hub on the western Texas Gulf Coast to Reynosa in northern Mexico.

The second section should go south to Los Ramones.

As part of Mexico’s program to import up to 1 billion cubic feet per day from the USA, the previous Government was speeding up with Pemex the development of the project.

Pemex’s international gas trading company MGI was mandated to lead the bidding process for this Los Ramones pipeline project.

But after the Presidential election, Mexico is passing through the transition period until the new President-elect Enrique Pena Nieto should take the position on December 1st.

During this transition period, Pemex’s board did not want to proceed with the complex bidding process of this project and decided to postpone the decision until the President-elect is officially in charge.

In parallel to the Los Ramones pipeline project, Pemex is making good progress on the North-West Gas Pipeline project along the Pacific Coast to connect south Arizona in USA to the north of Mexico.

Estimated to cost also around $3 billion capital expenditure, the North-West Gas Pipeline should be constructed in four sections.

The first section has been awarded to Sempra for $570 million.

Pemex operates already more than 60,000 kilometers of pipelines in Mexico from which the Los Ramones pipeline project and the North-West Gas Pipeline should be just some extensions.  

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3 Comments to “Competitive US shale gas favor Pemex pipelines projects to Mexico”

  1. Housotn, April 2, 2013


    Congratulations on a nice article and an interesting map. You do not provide attribution for the map, so I wonder if it is your own drawing or is it from another source. (If from another source, could you provide the URL?)

    My reporting service is focused on Mexican oil and gas; so if there is a way for me to help you in your reporting let me know. Our position is that it is a mistake for the Ramones Pipeline to be considered a Pemex project, and in an opinion piece published on Feb. 1, 2013, in REFORMA, I argued against Pemex involvement. There is no law or regulation that requires that Pemex be responsible for gas supply to Mexico; on the contrary, the 1995 NG Act specifically allowed private parties to import and export natural gas.

    Thanks again for the article. A good contribution.

    George Baker

    • Thank you very much for your comments and valuable additional input about Mexico, you are most welcome to contribute;

  2. I own farmland and a large undeveloped salt dome in NE Louisiana. I would like to speak with someone in your firm that is involved in salt dome development for natural gas storage.

    Thank you,
    Jim Dawkins
    President and General Manager
    Turkey Creek Farms of MS, LLC
    P.O. Box 1354
    Greenville, MS 38702
    telephone # 662-335-3590

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