New Mexican energy infrastructure to benefit Texas companies

by Mella Mcewen

For three years, Railroad Commissioner Charles Matthews has led delegations of Texas businesses -- including oil and gas companies -- to Mexico City to meet with Mexican officials and Mexican businesses. The commissioner recently hosted a delegation from the state oil company, Petroleos Mexicanos, representatives of Pemex's multiple service contract division. Matthews said commission staff and Pemex officials discussed the various rules, regulations and policies used to oversee the state's oil and gas industry.
"Pemex continues to try to work closer and closer with the Railroad Commission," said Matthews. "We continue to build that relationship with Pemex and that benefits Texas companies."

One company that has benefited from Mexico's investment in its natural gas resources is San Antonio-based Tidelands Oil & Gas, which last year opened a cross-border pipeline crossing between Eagle Pass and Piedras Negras, Mexico. The company just renegotiated its contract with CONAGAS (Cia. Nacional DE Gas,) which provides natural gas to Piedras Negras and distributes gas transported by Tidelands' pipeline.
Michael Ward, president and CEO, explained that, under the new contract, Tidelands will no longer buy and sell natural gas but will merely transport it, with CONAGAS responsible for its sale. This will eliminate the need for Tidelands to provide letters of credit, he said.

In addition, Tidelands plans to extend the pipeline from the Mexican bank of the Rio Grande by 20 miles, following the Highway 57 corridor to the Carbon I and Carbon II coal-fired electrical generation facilities.
"We have markets between Piedras Negras and Carbon I and Carbon II that will be served," said Ward. "There will be an immediate 10 to 20 mm cf expansion in volume." The pipeline, he said, has a capacity of 75 to 100 mm cfpd.
"The whole Highway 57 corridor will open into a new industrial corridor," Ward continued. "Until this pipeline, they didn't have access to natural gas. Large industry was not able to come there because of the inability to get natural gas."

The pipeline extension is expected to be built in the fourth quarter and take a month to complete. Tidelands has also announced plans to build additional crossings at the Progreso, Texas/Nuevo Progreso border and west of the Mission, Texas/Arguelles, Mexico border.
Ward said these 20-inch and 30-inch pipelines will be tied into the underground storage facility Tidelands is planning to build for Mexico, "which is a monster project. When it is fully developed, it will be the largest gas storage facility in North America. It will be a one-of-a-kind deal."

The project includes building and maintaining a hub of pipelines that interconnect with the storage facility and Mexico's oil and gas infrastructure. The company is in the final negotiating stages with Pemex regarding design, building and operating the facility, which is expected to be located in the Brasil field of the Burgos Basin, which lies directly across from South Texas.
"Everything we're doing, we're looking to Mexico," said Ward. Matthews said he is pleased with Tidelands' success, noting that "They've worked so hard."

Pemex is currently conducting the second round of its multiple service contracts bidding process. Pemex has over $ 10 bn to invest this year to increase its natural gas production, especially in and around the Burgos Basin. Matthews cited the Burgos Basin as an example of the opportunities Mexico offers Texas companies. Mexican officials estimate that the Burgos Basin is about 50,000 square miles and is geologically identical to the South Texas gas fields in Webb and Zapata counties, which also cover 50,000 square miles. In Texas, about 83,000 gas wells have been drilled on those 50,000 square miles while in Mexico, only 4,800 have been drilled on the same amount of space.
"To have the same spacing as on our side, they'll need to drill 70,000 more wells," Matthews said. "They don't have the equipment to do that, that's one opportunity that stands out and that's part of the $ 10 bn Pemex will spend each year on contracts."

Mexico will need over $ 150 bn over the next 10 years for its energy infrastructure. In addition, Pemex and the Mexican government are looking at and reviewing current policies regarding energy in order to open up partnerships and contracts to foreign investments. Matthews said Pemex realizes it needs outside help to do the work it needs to do to develop the enormous gas resources in Mexico.
"It's to our benefit to develop those gas resources as quickly as possible," Matthews said. Replacing Mexico's coal-fired electric power plants with cleaner gas-fired plants will clean the air in Mexico and along the Texas border and supply gas to meet US demand.
"Future projections are for the US to be short of gas to the tune of 5 bn cfpd," Matthews said. "We need to help them develop their gas resources for our own needs, so they can export gas to us as they do oil now. We're going to need Mexican gas, LNG, all the domestic gas we can produce, Canadian gas and still supplies will be tight."