Opportunities in Mexico | Russell T. Rudy Energy LLC
There is an old saying that as one door closes, another opens. According to a recent article in “World Oil”, this would appear to be the case with oil and gas opportunities in Mexico. The Mexican government has decided to allow foreign investment in energy projects for the first time in almost a century. Last month it held its first auction of oil and gas rights in the nation’s history. While it expected to sell 14 drilling blocks, only two received high enough bids to result in contracts. This was largely attributable to less than appealing contract terms and collapsing oil prices.
However, as part of the Mexican government’s new energy policy, foreign entities were also allowed to invest in natural gas transportation. The government is trying to cut its dependence on fuel oil for electric power generation. This has opened the door for U. S. pipelines and gas producers. Pipelines are less risky than oil and gas exploration and production, and offer quicker revenue generation. Consequently, the response from U. S. gas transporters has been prompt and significant.
Kinder Morgan Inc., the largest U. S. gas pipeline operator, is doubling the size of its U. S. to Mexico line. Oneok Partners LP, has also announced plans to invest up to $100 million in an expansion into Mexico.
Last week Infraestructura Energetica Nova, the Mexican subsidiary of Sempra Energy agreed to pay $1.325 billion for a 50% stake in a 73 mile long gas pipeline between the States of Nuevo Leon and Tamaulipas. This acquisition also gives the company control of the Los Ramones I pipeline which carries gas from South Texas to Nuevo Leon. Sempra indicated that it will consider additional investments as it digests this purchase.
Energy Transfer Partners already operates 62,000 miles of gas pipelines and has won two construction contracts valued at a total of $1,361 billion. The company will be the leader of a consortium of U.S and Mexican entities and will build a line which will connect Texas and Northern Mexico.
A group of investors headed by BlackRock Inc. has paid $900 million for a 45% interest in the Ramones II project which will run between the states of Nuevo Leon and Guanajuato. BlackRock has indicated that it is still looking for additional investment opportunities in the country.
The U. S. exported almost 71 billion cubic feet (bcf) of gas to Mexico in April, a 25% increase over 2014 levels. Bloomberg New Energy Finance expects this to increase to 150 bcf per month by 2020. The Comision Federal de Electricidad, a government owned utility, has requested bids on 12 projects totaling $8.7 billion to be awarded next year. The government hopes that this will result in a throughput of 210 bcf per month by 2018.
The best deals are the ones in which all parties benefit, and this seems to be the case with U. S. exports of natural gas to Mexico. There is plenty of gas North of the border. While Mexico’s gas production has declined by 16% since 2008, ours has increased by 44%. The Eagle Ford shale in South Texas is the largest U. S. gas field in terms of proven reserves, and ideally positioned to take advantage of this new market to the South. With crude oil prices continuing to slide, this could not come at a better time.
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/8/04/mexico-pipeline-boom-fueled-by-texas-drillers .
