Mexico’s 2nd US Gas Capacity Auction Declared Void

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Mexico’s second auction for natural gas transportation capacity held in the United States by its state-owned energy companies closed July 10 without an award, round organizer and transmission system operator Cenagas announced that same day, according to information service ICIS.

The round offered 2.1 Bcf, of pipeline capacity belonging to CFE International – the U.S.-based fuels trading arm of Mexico’s state power utility CFE – in five different pipelines linking gas hubs in the southern U.S. to the border. Although companies expressed interest in participating in the round, Cenagas said not one bid was received on the electronic board set up to administer the round.

CFE International plans to make the exact same capacity allocations available in the next auction, which is planned for Aug. 10, and will offer annual contracts beginning Sept. 1.

Mexico’s state oil company Pemex can also use the electronic auction process to market its capacity in pipelines connecting US hubs to the border, offering capacity on a daily, monthly or annual basis.

According to ICIS, the lack of interest was not a surprise to market participants, who warned prior to the day of the auction that the capacity available would be of limited use to the Mexican gas market. Only one of the five pipelines in which capacity was offered through the auction connects to the Sistrangas network, in which over 20 different marketers and industrial consumers hold pipeline capacity.

That same pipeline, the El Paso Natural Gas system at its interconnect with the Gasoductos de Chihuahua pipeline in northern Mexico, was also the lowest source of potential capacity, with  only 16 MMcfd made available. The other  four pipelines offered in the auction connects to new infrastructure under construction in the west of country, which is separate from the Sistrangas and designed to service CFE power plants and emerging industrial demand.

However, demand on these new pipelines is expected to remain constrained through much of the next 12 months due to the slow ramp-up of new power plants and the construction of associated distribution infrastructure in the region.

Prior to the launch of the auction, Mexico’s industrial association CONCAMIN issued a statement rejecting the auction process, which it labeled “insufficient.”

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