Taking the Road Best Travelled? CFE seeks electric-gas “convergence”

Explore:  Energy Reform Mexico Pemex

The recent constitutional reform of the Mexican energy sector will catapult Petróleos Mexicanos (Pemex) and Comisión Federal de Electricidad (CFE) into an unfamiliar competitive market environment. The rules of the game are not yet in place, but the former state monopolies over oil and gas exploration and production and electricity generation activities expect to compete in the broader national energy market side by side with other state and privately owned companies. This expectation has both Pemex and CFE scrambling to find a place in a new world and gain a competitive advantage against the newcomers.

Recent reports state that CFE will diversify its activities so that it will be not only an electricity generator, but also a transporter and seller of natural gas. Indications are that CFE intends to obtain and sell natural gas transportation capacity through the integrated Sistema Nacional de Gasoductos (SNG) and the isolated Sistema Naco-Hermosillo (SNH) gas transmission systems, positioning itself to compete directly with Pemex in the sale of transportation capacity in such government-owned pipeline systems and in the pipelines being developed by private companies and in which it has secured firm capacity rights as the main off-taker in power project development. According to CFE’s director Enrique Ochoa Reza, this structure will allow CFE to define prices and transportation terms and conditions in the Mexican natural gas business.

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Topics:  Energy Reform, Mexico, Pemex

Published In: Energy & Utilities Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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