Second auction for trans-border pipeline capacity fails

By Caroline Halter

The Trans-Pecos pipeline is complete, but Mexico is struggling to get companies to bid on capacity for it and others carrying natural gas across the border.

After receiving zero bids CENAGAS, the state corporation that oversees Mexico’s newly reformed energy market, declared last week’s auction void. The deadline for companies to submit bids had been extended to Aug 10, after the first auction in July failed for the same reason.

Ross Wyeno, a Senior Energy Analyst at S&P Global Platts, explained why companies are hesitant to participate.

“There’s just risk for the possibility that those downstream pipelines don’t come online on time,” he said. “The people bidding on these pipelines just don’t want to get burned…”

By “downstream pipelines,” Wyeno means the pipelines on the Mexican side of the border, many of which are still under construction.

Mexico’s newly deregulated energy market has led to growth in natural gas imports to meet the country’s growing electricity demand and Permian Basin producers see it as a huge opportunity. Although Texas is already the main supplier of natural gas to Mexico, most of the country’s imports currently come from the South Texas Eagle Ford area.

“It could probably triple Permian Basin gas to Mexico,” said Wyeno. “It’s just all waiting on the downstream pipes in Mexico.”

Those pipelines are scheduled to come online in January, but Wyeno says there’s a lot of doubt about that. CENAGAS says it will hold another auction next month on Sept 10.

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