13 th Annual Latin American Energy Conference Institute of the Americas LNG Regulatory Issues La Jolla, California January 30, 2004 Alberto de la Fuente Comisión Reguladora de Energía
Index I. Why LNG? II. III. LNG Projects in Mexico 1. Where We Stand 2. Next Steps Lessons Learned 2
Index I. Why LNG? 3
Natural Gas Demand Drivers 2002 Electric 30% Others 3% Natural Gas Demand by Sector Industrial 26% Petroleum 41% 2012 Electric Others 4% 45% 4,855 MMCFD Industrial 22% Petroleum 29% Source: Energy Prospective, Ministry of Energy, 2002 9,389 MMCFD 4
Natural Gas Demand Drivers Demand for natural gas will exceed national production 2012 Supply 6.8 bcfd 2.6 bcfd 9.4 bcfd Demand Alternatives: Source: Energy Prospective, Ministry of Energy, 2003-2012 5
1) Efforts to increase natural gas production in Mexico Mexico is currently producing 4.5 BCFD With Multiple Service Contracts & Strategic Gas Program, Pemex estimates that production will increase to 5,800 MMCFD by 2006 and 7,500 MMCFD by 2010 1,000 1,000 6500 4477 4800 2002 2006 2010 Pemex Production *Source: PEMEX Gas, Bussiness Plan, 2002 Multiple Service Contract 6
2) Pipeline Interconnection Infrastructure Interconnections between Mexico and the U.S. amount to 3.3 bcfd of cross-border firm capacity. Blythe-Yuma-Tijuana (0.4 Bcfd) San Diego-Mexicali- Rosarito (0.3 Bcfd) Bajamar- Rosarito (0.5 Bcfd) I LNG Ductos de Nogales (0.1 Bcfd) II III Loop Chihuahua 0.3 Bcfd USA Wilcox-Naco Agua Prieta (0.36 Bcfd) Norteño- El Paso-Samalayuca 0.4 Bcfd) EPFS-Arguelles 0.1 Bcfd constrained Eagle Pass-Laredo (Tidelands Oil) 0.05 Bcfd Del Rio- Coral-Arguelles Acuña 0.35 Bcfd 0.01 Bcfd Nueva interconexiòn 0.35 Bcfd TETCO(Duke)-Reynosa 0.15 Bcfd constrained KM-Monterrey- Tennessee-Reynosa Saltillo 0.35 Bcfd 0.3 Bcfd Tennesee-Rio Bravo 0.4 Bcfd Monterrey- SLP 0.3 Bcfd Frontera- Guaymas- Mazatlan 0.5 Bcfd IV Valladolid- Cancun 0.1 Bcfd Guadalajara- Manzanillo 0.3 Bcfd Mexico V Tama-Centro 0.4 Bcfd VI Sn. Fdo. 1 Bcfd LNG VIII VII Sistema Nacional de Gasoductos (SNG) LC_Manza- Nillo 0.3 Bcfd LNG Gas Zapata 0.2 Bcfd Palmillas -Toluca 0.3 Bcfd Ductos del sector privado Futuros ductos del sector privado Ductos del sector privado (prefactibilidad) Ductos en EUA Posible almacenamiento 7
2) Pipeline Interconnection Infrastructure Net Exporter 176 526 10,492 Net Importer 732 5 223 635 Net Importer Natural gas imports and exports (2002, mcfd) Source: U.S. DOE-EIA, Annual Energy Review 2002 8
3) Development of LNG Receiving Terminals 9
Index II. LNG Projects in Mexico 10
Index Where we Stand 11
10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 LNG Projects in Mexico Natural Gas Prices (Houston Ship Channel) (Dollars/MMBtu) 1 2 3 4 5 6 7 8 J F M A M J J A S O N D J F M A M J J A S O N D E F M A M J J A S O N D J 2001 2002 2003 1 Spring 2001 Prices reached 9.84 USD/MMbtu and companies expressed their interest to build LNG Terminals in Mexico 2 Autumn 2001 CRE developed the regulatory framework for LNG Terminals in Mexico 3 August 2002: CRE published NOM-EM-001-SECRE-2002 CRE issued a guide for permit applications Marathon Permit Application 4 Sep, Oct & Nov 2002 CRE received 4 more application permits (Sempra, Shell - Baja & Altamira-, Chevron - Texaco Onshore) 5 By December 2002 CRE is evaluating 5 proposals 6 April 2003 -Marathon was granted the first LNG storage permit in Mexico 2004 7 8 July 31, 2003 CRE granted 2 LNG storage permits to Shell, one for Baja California and the other for Altamira August 7, 2003 CRE granted a LNG storage permit to Sempra Energy 12
LNG in Mexico Two types of projects Bid driven (i.e. Altamira) Market driven (i.e. Baja California) Regulatory Objectives: Safety Open Access Cost-Based Tariffs Several authorizations required 13
LNG Storage Permits Granted Tijuana Mexicali Rosarito Naco Cd Juarez Baja California Marathon (Tijuana) Sempra (Ensenada) Shell (Ensenada) Chihuahua Monterrey Reynosa Matamoros Cd Madero Altamira Shell Poza Rica Toluca D.F. Cd. Pemex 14
LNG Storage Permits in Mexico Over the last 6 months, the CRE granted 4 permits to build and operate LNG receiving facilities in Mexico Three are located in Baja California and one in the Gulf of Mexico Potential total firm regasification capacity could be 3.6 bcfd and peak regasification capacity of 4.3 bcfd Projects could begin operations in 2006 and 2007 Open Access requirement on non-contracted capacity Storage and regasification tariffs based on cost of providing service Projects will diversify sources of gas and help stabilize prices Full containment tanks Investment commitments, up to 2.4 Billion USD 15
Index Next Steps 16
Offshore LNG Application On July 29, 2003 ChevronTexaco submited a modification regarding the site for the LNG storage facility to place it in the Pacific Ocean, nearby the Coronado Islands Chevron-Texaco de México Permit Application Chevron- Texaco Adittional Information Delivery Admission to Formal Review and Publication Proposal Evaluation Decision 10/07/02 12/10/02 01/21/03 2004 Offshore Application 17
Other Possible LNG Storage Terminals Tijuana Mexicali Rosarito Baja California (Offshore) Naco Cd Juarez Chihuahua Topolobampo? Reynosa Monterrey Matamoros Burgos Cd Madero Península de Yucatán Poza Rica Manzanillo? Toluca D.F. Cd. Pemex Lázaro Cárdenas? Salina Cruz 18
NOM-013-SECRE-2003 for LNG Plants Comité Comité Consultivo Consultivo Nacional Nacional de de Normalización Normalización de de Gas Gas Natural Natural Working Group drafts the first project CRE CRE presents presents the the NOM NOM project project and and MIR MIR Official Official Gazette Gazette 60 60 days days Public Public Consultation Consultation (November (November 19) 19) COFEMER COFEMER CCNNGN CCNNGN responds responds to to Public Public Consultation Consultation CRE CRE publishes publishes comments comments in in the the Official Official Gazette Gazette Final Final NOM NOM is is published published in in the the Official Official Gazette Gazette 19
Regulation for Storage Permits Applicants must include among others: Technical description of the project Technical, administrative and financial capability of project Description of safety methods and procedures for the operation and maintenance of the system Non-discriminatory General Terms of Service Information on Potential Supply sources Justification of potential demand Compliance with NOM 20
Regulated Activities CRE Permit SEMARNAT Permit Financing Other Permits Use of Land Permit Commercial Agreements 21
Index III. Lessons Learned 22
Lessons Learned Mexico has to increase its natural gas supply LNG storage projects will diversify the sources of natural gas and help stabilize prices The regulatory framework has to adapt permanently to provide stability and certainity to investors No project is alike Educate, Educate, Educate 23
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