The latest open season for natural gas transport capacity on Mexico’s Sistrangas pipeline network generated little interest from shippers amid sluggish growth in industrial demand for the fuel.
Pipeline operator Centro Nacional de Control del Gas Natural (Cenagas) awarded just 6,933 GJ/day, or 1% of the capacity on offer. The only two shippers to be awarded capacity were steelmaker T A 2000 SA de CV and tool manufacturer Truper SA de CV.
Cenagas had made available 657,405.773 GJ, or 631 MMcf/d, at receipt points throughout the country, which relies on U.S. pipeline imports to meet about 72% of its gas needs. The previous open season, which concluded in early 2024, saw Cenagas award nearly all of the 564 MMcf/d on offer.
The latest result, while underwhelming, was not entirely surprising, Mexico City-based natural gas expert Santiago Villareal told NGI. “What I see…is that the market has stagnated,” Villareal said. He explained that pipeline congestion is not an issue for large consumers on the Sistrangas, meaning they are in no rush to sign onto long-term, binding commitments for capacity.
What’s more, he said, some shippers are ceding their unused capacity on the secondary market at a loss in order to recoup at least some of the base transport tariffs that they are contractually obliged to pay to Cenagas.
The open season results came amid projections of robust growth in energy demand due to nearshoring, which is the relocation of manufacturing and supply chains from overseas to North America.
The trend has been slow to materialize in Mexico, where industrial natural gas demand is down slightly this year-to-date, according to Wood Mackenzie data.
Uncertainty around the radical constitutional reforms proposed by outgoing President Andrés Manuel López Obrador is not helping investor sentiment either, Villareal said. Mexico’s lower house and senate have already approved an overhaul of the selection process for federal judges.
A separate proposed reform would eliminate Mexico’s independent energy regulatory bodies
Gadex energy consultancy co-founder Eduardo Prud’homme also noted that pipeline systems commissioned by state power company Comisión Federal de Electricidad (CFE) – namely Sur de Texas-Tuxpan and Wahalajara – have diverted gas flows from the Sistrangas, reducing the incentive for shippers to secure capacity on it.
“It’s not so urgent to have capacity because there isn’t any congestion,” Prud’homme said, “and in any case you can use interruptible service…Cenagas has no justification to cut your volumes if the main entry points are not full.”
Nonetheless, Prud’homme called the open season results “astonishing,” adding that he never expected “such poor results.”
Cenagas Senior Project Leader Jose Medel Zapata said in a LinkedIn post that the open season results “were not what we hoped for.” They reflect an “operational realignment” through which marketers are seeking to optimize the level of use of the reserved capacity” based on industrial demand.
He added, “Likewise, the industry is paying more and more attention to the rules of the natural gas market; therefore, they are looking for the alternatives that best suit their industrial operation scheme, opting for the marketer or marketers that offer alternatives (transport redundancy) with the supply of molecule (quality and better prices)...”
