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Mexico racing to lay pipes to reach more U.S. gas this summer

July 04, 2017

  • México compite con el reloj para poner tubería de gas natural en línea este verano.
    Mexico is racing against the clock to get natural gas pipelines online this summer.

Mexico is racing against the clock to get natural gas pipelines online this summer.

The nation has found itself “in a tight situation,” said David Madero, who overseas the government’sNatural Gas Control Center. The season when gas demand typically peaks is already here, and Mexico is still dealing with setbacks in getting long-anticipated pipelines into service.

The delays are causing a glut of natural gas to swell up north of the border as U.S. shale drillers wait for the lines to carry their fuel to market. Citigroup Inc. warned the holdups in Mexico would probably force gas in the Gulf Coast to trade at heavy discounts.

“The good news is that we are constructing a lot, the bad news is that we are a bit delayed, which is rather normal in this industry,” Madero said. “We would have loved to see these projects online before the peak of the demand this summer.”

The seven gas projects under construction, in addition to others in the northwest, are part of the government’s five-year energy plan. Technical hitches and issues with local landowners are to blame for the delays, according to Madero, who said he’s confident they’ll eventually all get done.

“If they are delayed one month, three months or one year more, well, that is how long they will take,” he said, emphasizing that the delays hadn’t reached a crisis point.

A director of Mexico’s state-owned utility said earlier this month that it’s pushing pipeline builders so it can complete new gas-fired generation by the end of 2018. Delays of three to four months could push back plans to as late as 2019 in some cases.

The Los Ramones Phase II line, which state-owned Petroleos Mexicanos is developing with private equity firm First Reserve Corp. and BlackRock Inc., is meanwhile “practically operating at 100 percent,” Madero said. The pipeline network, which imports gas from the U.S., is projected to boost U.S. gas deliveries south of the border by about 17 to 22 percent, according to Bloomberg New Energy Finance.

“If everything goes as well as we hope, for 2020, we are going to have capacity to import more than 14 billion cubic feet per day, of which we would expect to use a little less than half,” Madero said. The country brought in 129.9 billion cubic feet of U.S. gas by pipeline in March alone, Energy Information Administration data show.

Mexico is in talks with the Mexican Petroleum Institute and consultants from Texas to analyze geologic formations for suitable underground gas storage sites, Madero said. Possible locations are in the northern Gulf of Mexico area in Tamaulipas state, Veracruz and Tabasco, he said. His agency hopes to make its first formal proposal to the energy ministry as soon as this year, according to Madero.

More from business: Southwest to reduce flights to Cuba

Southwest Airlines Co.will join other U.S. carriers in reducing flights to Cuba, saying laws that restrict Americans from traveling to the island for tourism are constraining demand.

Southwest becomes the latest airline to accept that the industry, with little way to judge demand beforehand, was too optimistic when U.S. regulators allowed passenger routes to the island nation last year for the first time in decades. President Donald Trump added to the woes earlier this month by announcing restrictions that may stall U.S. business in Cuba. The new limits don’t change airline operations but may affect demand.

“Commercial airlines had not been involved in the Cuba market since before 1959,” said Tom Popper, president of tour operator InsightCuba. “It’s a natural shift in a marketplace where there was no historical data and a lot of unknowns, but everybody went in full force. You make the best predictions you can, try it and make adjustments as time goes on.”

American Airlines Group Inc. and JetBlue Airways Corp. previously trimmed their service to Cuba, while Spirit Airlines Inc., Frontier Airlines Holdings Inc. and Silver Airways Corp. pulled out completely.

Southwest will drop service to Varadero and Santa Clara on Sept. 4, and continue flying to Havana twice daily from Fort Lauderdale-Hollywood and Tampa airports in Florida, the carrier said.

“Our decision to discontinue the other Cuba flights comes after an in-depth analysis of our performance over several months which confirmed that there is not a clear path to sustainability serving these markets, particularly with the continuing prohibition in U.S. law on tourism to Cuba for American citizens,” Steve Goldberg, senior vice president of ground operations, said in the statement.

Southwest Chief Executive Officer Gary Kelly previously said he would give the Cuba markets a year before deciding on continuing service. The Dallas-based carrier began flights to Varadero in November and to Santa Clara in December.

The airline is contacting customers holding travel reservations for those cities on Sept. 5 and beyond to offer refunds.

Southwest is seeking U.S. approval for a third daily Havana-Fort Lauderdale flight from among those given up by airlines that have left the island. American, JetBlue, Delta Air Lines Inc. and United Continental Holdings Inc. also are trying to secure those routes.

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