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S P R I N G 2 0 1 5
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and in the Bajío region of central Mexico.
As a result, the Los Ramones pipeline
project was conceived. In spite of its
magnitude, however, one single project
seemed insufficient if it would play with
the existing rules. With a new federal
administration by the end of 2012, the
favorable political environment for a
major energy reform was the opportunity
to modify the regulatory foundations of
the infrastructure that connects natural
gas supply and demand.
In December 2013, the Mexican
Constitution was amended in order to
change the paradigm of the Mexican
energy sector towards a free market
model with strong regulation where
needed. In August 2014, the new
Hydrocarbons Law was published, and
on November 1, 2014, the presidential
Rules for the Activities referred to by
the Third Title of the Hydrocarbons Law
(midstream and downstream activities)
became effective.
The principal innovation of these
legal bodies is the creation of the
National Center for Control of Natural
Gas (Centro Nacional de Control del
Gas Natural, "CENAGAS"), mandated
by the transitory constitutional articles
and materialized by a presidential
decree issued last September. The
CENAGAS has a double mandate: (a)
it will inherit and administer all the
infrastructure that PGPB owned for
rendering gas transportation services,
and the corresponding contracts, and (b)
it will serve as the operator of the natural
gas transportation and storage national
integrated system, made up by its own
infrastructure and other interconnected
infrastructure that offers systemic
benefits. Thus, the CENAGAS is not
itself an independent system operator but
a "Transco," following the Anglo-Saxon
terminology. While this is not an ideal
world, it is better than what we had in
the past.
The Hydrocarbons Law further
provides that other integrated systems
may be formed with the purpose of
expanding coverage or offering benefits
in terms of improvements in security,
continuity, quality and efficiency in the
rendering of services. Each of these
systems shall have an independent
operator, which will coordinate the
different transporters and ensure open
access, subject to a CRE permit.
On this point, the new legal
framework is very clear: open access
that is not unduly discriminatory is the
cornerstone of the regulation of natural
gas networks. To ensure such, rules
exist detailing the posting of available
capacity, secondary capacity markets,
"Chinese walls" and unbundling,
users' investments for interconnection
purposes, rate regulation, and strict
constraints (although the extent of such
is still uncertain) on self-supply.
In addition, first-hand sales by
productive State companies (Pemex and
the Federal Electricity Commission,
"CFE"), or any corporate entity on behalf
of the State, must be carried out at the
origin of the product and are subject to
asymmetric regulation, with which one
should expect an orderly and transparent
use of system capacity and, hopefully,
the flourishing of commercialization
by agents other than Pemex, under a
permits regime.
The CRE is now also responsible for
granting permits for the compression,
decompression, liquefaction and
regasification activities that began
to develop independently in the past
decade; the first two, particularly
regarding the supply of natural gas
for vehicles, and the second two
being fundamentally linked to ground
transportation in regions without
pipelines.
All of these changes occur in an
institutional context in which the CRE
will be a stronger, more independent,
transparent and accountable economic
regulator, which will transfer the
authority for technical regulation
of this entire infrastructure to the
National Agency for Industrial Safety
and Environmental Protection in the
Hydrocarbons Sector.
In the meantime, the federal
government has launched an ambitious
expansion plan of the pipelines' network.
This includes the Los Ramones system
with its 1,000s kilometer tract and 42-
inch diameter, whose first segment was
recently opened, as well as the Pacific
corridor, anchored through bidding
by the CFE in order to supply U.S.
gas to combined cycle power plants in
northwestern Mexico and to industrial
and residential consumers in that region.
Consequently, before there is a boom in
shale gas production in Mexico utilizing
fracking techniques, we will see more
and more importations.
There is no doubt that Mexico is
betting heavily on natural gas to be the
fuel of the present and the future.