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Mexico looks to increase natural gas storage

10 Jan 2018, 10.16 pm GMT

Mexico looks to increase natural gas storage

Mexico City, 10 January (Argus) — Mexico plans to award tenders to build needed natural gas storage by the fourth quarter of this year, a draft policy published by the energy secretary shows.

The energy secretary, energy regulatory commission (CRE) and state gas agency Cenagas drafted a policy that mandates the creation and maintenance of strategic inventories throughout the country.

The document is currently being reviewed by market participants until 28 January.

The plan is for Cenagas, the body in charge of overseeing the transport and storage of natural gas in Mexico, to have 45Bcf of stored gas (equivalent to five days of national consumption) by 2025.

The policy favors the construction of gas storage in hydrocarbon deposits that have been ruled as economically unviable for extraction. Other technologies will be considered if a region does not count with such reserves.

Cenagas has identified 15 fields with original volumes in place estimated at 2.13Tcf, and that they believe have potential for gas storage. The list includes an abandoned, subterranean oil well known as Brasil, for which a tender was announced last October to take place early this year.

Other depleted fields spread across the regions of Burgos, Veracruz and Macuspana–Muspac. A data set including geological information will be available to companies interested in participating in a round of tenders that Cenagas will organize throughout the year.

A natural gas emergency response plan establishing the guidelines on how to use Cenagas' strategic inventories will be published by June.

Under the proposed policy, all permit holders will have to file regular reports on volumes produced, transported, stored and distributed, starting on 1 September. The energy secretary will then publish supply and demand reports, as well as natural gas storage volumes.

Boosting the country's gas storage capacity is part of Mexico's ongoing implementation of a 2014 comprehensive energy reform that dismantled the monopolies of state-owned oil company Pemex and state-owned utility CFE.

Greater natural gas storage would allow domestically produced gas to compete with LNG imports, and strengthen Mexico's energy security, the government has said.

Mexico's wet gas production has fallen 14pc in the last year, reaching 3.8Bcf/d in November, data from state-run Pemex shows. Dry gas production has fallen by 8pc year on year to 1.004Bcf/d.

Imports have gone down 18pc to 1.697Bcf/d over the past year, but compared with the beginning of this administration in 2012, imports have grown 54pc.

The reliable and steady supply of wet gas is particularly critical to the country's petrochemical industry, which has been faced with low provisions.

Petrochemical production reached 497,514 t last November, 52pc below its November 2016 levels. The decrease was also attributed to lower crude processing at Pemex refineries.

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