Weekly Report - 03 April 2014 (WR-14-13)

MEXICO| ‘Los Ramones’ pipeline. On 27 March Mexican government officials formally launched the second phase of the ‘Los Ramones’ gas pipeline, which once completed, will allow Mexico’s state-owned oil firm, Pemex, to import larger volumes of natural gas from the US. The US$1.2bn project will extend 1,201km from Camargo, Tamaulipas, on the Mexico-US border to the state of Guanajuato in central Mexico. It is considered one of the most important energy infrastructure development projects undertaken in Mexico in the last four decades as it will ensure gas supplies to the industrial poles located in north-eastern and central Mexico, which account for approximately 20% of the country’s total gas consumption. The launch ceremony held at Pemex’s Los Ramones regasification plant in Tamaulipas was attended by Energy Minister Pedro Joaquín Coldwell, Environment Minister Juan José Guerra Abud and Pemex’s general director, Emilio Lozoya Austin. Coldwell explained that the first phase of the project, which involves constructing a pipeline linking Camargo to the Los Ramones plant, was already under way; and that by launching the second phase, which would extend the pipeline from Los Ramones all the way to Guanajuato, the government hoped that the project would be completed and become operational by December 2015. Lozoya said that completing the project was “fundamental” to guarantee Mexico’s natural gas supplies for the next 15 years and to “alleviate some of the existing bottle-necks” in the domestic provision of natural gas. Mexico currently produces 6.4bn cubic feet of natural gas per day, but this is insufficient to cover domestic demand. In recent years sector analysts have warned that Mexico could face gas shortages given that consumption of the fuel has been increasing at an annual rate of 2.5%-3% for the past five years. Last year the Mexican government had to issue a number of ‘critical alerts warnings’ over low levels of gas supplies readily available for some central states including San Luis Potosí, Guanajuato and Querétaro. Pemex currently imports an average of 1.3bn cubic feet of gas a day from the US in order to satisfy domestic demand. Once completed the new pipeline is expected to have the capacity to transport between 2bn and 2.1bn cubic feet of natural gas per day from the US into Mexico, allowing Pemex the possibility to increase its US gas imports by as much as 3.4bn cubic feet per day if necessary. In addition Lozoya said that it would also help to bring down domestic gas prices, which should help to boost the competitiveness of Mexico’s industrial sector in the same way that lower gas and energy prices have recently done in the US. Indeed, pointing out that currently natural gas prices in the US are among the lowest in the world, Lozoya said that the Los Ramones pipeline would ensure that “Mexico joins the North American energy revolution”.  Guerra said that completion of the project would also have a positive effect on the environment as it would help to further promote the use of a cleaner and more environmentally friendly fuel such as natural gas.

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