Pemex to Open Bidding for $600 Million, 230-Kilometer Natural Gas Pipeline in Central Mexico

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Researched by Industrial Info Resources (Sugar Land, Texas)--Mexico's state-owned petroleum company, Petroleos Mexicanos (Pemex) (Mexico City), has indicated that the company is preparing to open bidding for the construction of a $600 million natural gas pipeline project in central Mexico.

Oil and upstream gas activities are legally restricted to the state company, but transmission, storage, distribution and marketing of natural gas have been open to private sector interests since 1995, when the Regulatory Act for the petroleum industry was reformed. Pemex has said that there is a high level of interest from pipeline, infrastructure and construction firms and that 18 companies have expressed interest in the project.

The project entails the construction of two separate pipelines: a 230-kilometer, 30-inch-diameter pipeline from Tamazunchale to San Luis de la Paz, and a 56-kilometer, 24-inch-diameter extension to a pipeline from San Luis de la Paz to San Jose Iturbide. The project is aimed at transporting up to 400 million cubic feet per day of natural gas; it is seen as an alternative gas transportation system to central Mexico, and will feed new electricity plants.

Pemex announced the proposed project in December and was expected to begin seeking bids from interested parties in April, with a scheduled completion date for both pipelines at that stage in 2011. The project tender will include a 20-year service contract, and the successful bidder for the project will be able to gain control over the pipeline routes in addition to the technical specifications for the project.

Mexico is expected to become more dependent on imports of natural gas in the years up to 2030 as investments and production in the natural gas sector fall behind the expected growth in demand. The difference between supply and demand will be largely filled through pipeline imports from the U.S. and liquefied natural gas tankers. The vast majority of natural gas consumption in Mexico is in the industrial and power sectors, with electricity generation expected to show the highest growth rate. In 2006, the industrial sector consumed more than twice as much natural gas as that used for power generation, whereas by 2030 both sectors are expected to consume equal amounts of gas.

Pemex is one of the largest integrated oil and gas companies in the world, with more than 140,000 employees and major business operations in the areas of crude oil and natural gas exploration; refining and marketing of petroleum products; manufacturing and sale of petrochemicals; and gas processing.

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