Natural Gas Supplies to Pemex, Other State Entities to be Prioritized

SEATTLE (Oil Monster): Mexican state fuel marketer CFEnergia will prioritize natural gas supplies to state-owned companies, including Pemex, boost industrial activity and even potentially participate in upstream activities under the new administration of President Andres Manual Lopez Obrador, according to Miguel Reyes, CFEnergia's general director.

"We won't cancel our gas sales to third parties. However, we will prioritize the supply to strategic sectors," Reyes told S&P Global Platts.

CFEnergia is the fuel marketing arm of state-owned utility CFE. It currently trades over 3.4 Bcf/d of natural gas, nearly half of the country's demand. The subsidiary was created after Mexico's 2013 landmark energy reform to improve the supply of gas to CFE power plants.

Amid decreasing domestic gas production, CFEnergia is coordinating with state-owned gas system operator Cenagas and Pemex to ensure the industrial gas needs from the state oil company is satisfied.

As Pemex has prioritized oil-rich projects amid budget constraints, the company's gas production fell to 3.8 Bcf/d in 2018 from an all-time high of 6.5 Bcf/d in 2009

"Where are speaking with Pemex to form common strategies, respecting each one's action areas and responsibilities," Reyes said.

The company will also seek to supply gas to those key industrial sectors that will help achieve Lopez Obrador's goal of growing the economy by 4% per year.

"This might push us to seek to expand our sphere of influence beyond the sectors we currently serve," Reyes said.

CFEnergia's first priority is making CFE's generation units more competitive by reducing fuel costs, Reyes said. However, the subsidiary is also analyzing new strategies and infrastructure projects.

Anchoring new upstream gas projects and bringing gas to news regions of Mexico are among the ideas Reyes is exploring for CFEnergia's new business plan. Asked if CFEnergia could participate in the upstream sector, Reyes could not confirm it at the moment. The subsidiary has the financial muscle to invest in new gas production, but the challenges to implementing this plan are regulatory and strategic, he added.

"It is very important to see the opportunity cost from bringing gas from the US or developing new fields," he said. "The most expensive fuel is the one you don't have."

CFEnergia could work with Pemex or private upstream operators to develop new upstream gas projects.

"We are exploring all opportunities as long as they ensure CFEnergia's profitability," Reyes said.

CFEnergia is also seeking opportunities in developing new gas storage capacity to help Mexico be better prepared to face any potential gas supply disruptions, he added.

Courtesy: www.spglobal.com