Mexico has been slowly increasing import volumes of natural gas from the U.S., utilizing spare capacity in the newest pipelines south of the border that access supply from the Permian Basin’s Waha Hub. The recent increases have been muted somewhat by delays in completing other infrastructure inside of Mexico, but one of those big delays is about to be resolved. TransCanada’s long-awaited El Encino-Topolobampo Pipeline is finally nearing completion, and once it’s online there may be a surprisingly big gain in gas export volumes to Mexico. As most of this gas will be supplied directly from Waha, Mexico’s impact on Permian gas balances is likely to jump materially in the weeks ahead. Today, we examine the latest development in Mexico’s natural gas pipeline buildout and its effects north of the border.
We last looked at the buildout of Mexico’s natural gas pipeline infrastructure in our Closer blog, where we took a deep dive into the most recent developments in Northwest Mexico, focusing on the Fermaca-built pipeline network. Prior to that, we wrote Welcome to the Future, in which we evaluated the evolving structure of Mexico’s pipeline transportation capacity market and its implications for flows and pricing of gas within the U.S.’s southern neighbor. That blog also discussed the role of Comisión Federal de Electricidad’s (CFE) marketing affiliate, CFEnergía, in marketing and trading gas and other fuels within Mexico. In today’s blog, we shift focus to the El Encino-Topolobampo Pipeline, which will link demand along the west coast of Mexico to the Permian, and the plan by CFEnergía to provide Permian-sourced gas to power plants along the new pipe.
First, a little background about the pipeline that is nearing completion, the El Encino-Topolobampo pipeline (lavender line in Figure 1). Way back in 2012, CFE put out tenders for several new natural gas pipelines across Mexico, including the 350-mile El Encino-Topolobampo Pipeline in the northwestern part of the country. TransCanada won the tender for the 30-inch-diameter pipe, which will stretch from El Encino in Mexico’s Chihuahua state to the city of Topolobampo on the coast of the Gulf of California in the state of Sinaloa; the pipe will have a capacity of 670 MMcf/d. El Encino has developed into something of a gas pipeline hub, as five pipelines pass through the area. The El Encino-Topolobampo Pipeline begins there, as does the El Encino-La Laguna Pipeline (pink line). The latter is being built by Fermaca and was detailed in Closer. Supply comes into El Encino from the north via the Tarahumara Pipeline (red line), also operated by Fermaca, and from the east via the Ojinaga-El Encino Pipeline (dark green line), operated by Sempra Energy’s Mexico affiliate, IEnova. The El Encino-Topolobampo Pipeline can receive supply from either of these two pipes. The fifth pipeline at El Encino is a leg of the Sistema de Transporte y Almacenamiento Nacional Integrado de Gas Natural (SISTRANGAS) system (orange line shows the leg) that traverses the hub from north to south. At present, the SISTRANGAS-owned pipeline doesn’t interconnect with the other pipelines at El Encino, but a new tie-in is planned to come online in October 2018. It will provide 70 MMcf/d of capacity between SISTRANGAS and the Fermaca pipelines (El Encino-La Laguna and Talahumara) at El Encino.