(Bloomberg) -- Never mind Mexico’s oil reform. These days, the action is in natural gas.
Since last year, when new laws made it easier for foreign companies to export gas to Mexico, there’s been more than $10 billion of planned or completed pipeline investments announced by companies such as Dallas-based Energy Transfer Partners LP. On Monday, Juno Beach, Florida-based NextEra Energy Partners LP agreed to a $2.1 billion acquisition of closely-held NET Midstream, owner of seven pipelines including a 120-mile stretch that runs from Texas to the Mexican border.
Tumbling crude prices have damped prospects that the Mexican oil-drilling laws adopted last year will spur an investment boom. Instead it’s the surge in gas-pipeline construction that’s attracting foreign capital, expanding the market for U.S. gas producers and meeting growing demand from Mexican manufacturers and power plants.
The pipeline construction “is similar to building a first- class highway system,” Glenn Pinkerton, a partner at Sidley Austin LLP who has worked on Latin American energy financing and infrastructure projects, said in an interview.
Just last week, Infraestructura Energetica Nova, a unit of San Diego-based Sempra Energy known as Ienova, agreed to pay $1.325 billion for a 50 percent stake in Gasoductos de Chihuahua, which operates a 73-mile pipeline between the northern states of Nuevo Leon and Tamaulipas.
Kinder Morgan Inc., the largest U.S. pipeline operator, is doubling the size of its U.S.-Mexico pipeline, while Tulsa, Oklahoma-based Oneok Partners LP said it would spend as much as $100 million on an expansion to Mexico.
The past year’s drop in crude prices by more than half has dimmed private oil producers’ appetite for Mexico, which was supposed to draw an estimated $62.5 billion of energy investments through 2018. In an oil-rights auction last month, the first in the nation’s history, only two of 14 drilling blocks drew sufficient bids to win a contract.
With gas, there’s been less hesitation.
“You see points on the board a lot quicker in pipeline development than in the oil and gas sector,” Jeremy Martin, an oil specialist at the Institute of the Americas in La Jolla, California, said in a phone interview.
Oil rose 2 percent to $46.08 a barrel as of 10:45 a.m. in New York on Tuesday, trimming its decline over the past year to 53 percent.
U.S. gas exports to Mexico totaled a near-record 70.9 billion cubic feet in April, up 25 percent from a year earlier, according to the U.S. Energy Department. Exports are forecast to reach about 5 billion cubic feet per day by 2020, according to Bloomberg New Energy Finance. That works out to about 150 billion cubic feet a month.
Some of the additional gas demand comes from a push by Mexico to cut dependence on fuel oil for electricity production.
In January, Energy Transfer Partners, which operates more than 62,000 miles of gas pipelines, won two construction contracts valued at a combined $1.363 billion as part of a consortium with Coral Gables, Florida-based MasTec Inc. and Mexican billionaire Carlos Slim’s Carso Energy SA. The projects will connect Texas with northern Mexico.
Sempra’s Ienova will consider additional investments as it digests the latest pipeline purchase, according to Chief Executive Officer Carlos Ruiz. The company will now control all of the Los Ramones I project, which carries gas from southern Texas to the northern Mexican state of Nuevo Leon.
View Full Article
Copyright 2017 Bloomberg News.
WHAT DO YOU THINK?
Click on the button below to add a comment.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Most Popular Articles
From the Career Center
Jobs that may interest you