The classic demand and supply dynamic will determine how quickly Mexico develops its natural gas pipeline, panelists said at the Mexico Oil & Gas Summit 2017 as they reflected on the challenges and opportunities that Mexico’s fast-growing pipeline network entails.
“We are experiencing a transformation. From having a government controlled industry, we are now going to a market-controlled dynamic. This means that transformation incentives such as price differentials will have to come from the market,” said David Madero, Director General of CENAGAS, during the panel discussion at the Hotel Sheraton María Isabel in Mexico City on Wednesday.
Madero was joined by Lorena Patterson, President of AMGN; Jan Frowijn, Director General of the ROSEN Group Mexico; and Alejandro Lupiañez, Vice President of Mexico Operations for Wood Group.
Patterson said that attending infrastructure needs such as the creation of pipelines was key for the development of the natural gas market. “Natural gas is a fairly convenient energy source for Mexico; it is the most economical, cleanest and efficient fuel.” Madero agreed that characteristics inherent to natural gas, alongside its multiple uses, are driving a rise in demand. “Natural gas will continue being very important not only for the energy industry — the manufacturing industry will also benefit and even residential areas.”
Frowijn added that even though market development is important, clear regulations are needed to further its growth. “Setting a regulatory framework and its subsequent implementation are crucial.” For Lupiañez, even though natural gas can be a catalyst for the development of a pipeline network, the rules of the game must be clear before planning even starts for more infrastructure construction. “We need transparency regarding the regulatory framework and its interpretation.”
Madero echoed that sentiment, adding that in Mexico, of all hydrocarbons, natural gas has the most up-to-date and stable regulation. However, he also acknowledged that for it to continue growing, it needs to have a more developed and strong regulatory framework. “Regulations need to be modernized alongside the industry.”
While a clear set of rules is necessary, Frowijn said that will only go so far. “The future of the industry is not technology or laws and regulations. At the heart of the development are people. It is important to transfer knowledge and to support the creation of a new generation of professionals.” Lupiañez said that in a country as diverse and big as Mexico, the transfer of knowledge and experience is crucial: “The problems associated with building the needed network change depending on which part of the country you are. Although we have the required technology to do it, we encounter several problems related to local communities. We need people with experience to deal with this.”
Still, Lupiañez is confident and believes that the missing pieces of the puzzle are trust and communication among all the players. “Technology companies need to be involved in the decision-making process from day one and not just at the end,” he said.
Although demand will continue growing, it will be volatile, which is why investors want transparency, Madero said. “Investors need clarity and certainty regarding their investments, knowing that there will be volatility associated with the appearance of renewable energies. Providing good and competitive services will help companies to obtain profit and contribute to the development of the market.”