Mexico’s reliance on natural gas imports from the US continues to drive major projects. On August 12, San Antonio-based Howard Midstream Energy Partners announced it would begin a second round of reaching out to shippers, and, if there is enough interest, will expand its planned Nueva Era Pipeline (a joint venture between Howard and Grupo Clisa) from a capacity of 504 million cubic feet of gas per day to 1.12 billion per day. This second round will end on September 15, 2015. When completed in June 2017, the pipeline will connect Howard’s Webb County Hub in southern Texas to Escobedo, Nuevo León, Mexico, and to the Mexican National Pipeline System in Monterrey.
This development came less than a month after Galicia Abogados, a Mexico City-based firm, and global firm Latham & Watkins advised Fermaca Pipeline el Encino on July 24 in financing for a 465-kilometer natural gas pipeline, which will move gas from Texas to thermo-power plants in the Mexican states of Chihuahua and Durango. The principal amount of this deal was worth $603,924,952 and the VAT Facility, $104,073,840.39. The pipeline is expected to be operational in 2017, according to a July 28 Energy Voice article by Phil Allan. It will transport 1,500 million cubic feet of gas daily. Partner Francisco Fernandez Cueto led Galicia Abogados, while partners Thomas Malone, Christopher Cross, and David Penna led Latham & Watkins in advising Fermaca. New York-based Milbank Tweed Hadley & McCloy and Mexico City-based Ritch Mueller Heather & Nicolau provided counsel to lenders, which included Citigroup, ING, NordLB, Banco Santander, Sabadell, and Goldman Sachs.
This is the first pipeline project fully developed and financed under Mexico’s hydrocarbons law, according to Galicia Abogados. The tender to construct the pipeline was awarded to Fermaca in December 2014 by Mexico's Comisión Federal de Electricidad (CFE). This came after Partners Group, an investment manager, acquired a majority stake in Fermaca in February 2014.
With dwindling natural resources and the looming threat of climate change, sustainable energy has been a concern for many. Conserve-Energy-future.com points out that while natural gas is energy efficient and therefore cost efficient, it is also a finite resource, and the cost of pipelines is significant. When asked about the long-term sustainability and cost-efficiency of this pipeline, a Latham & Watkins spokesperson said, “On a delivered basis per MMBtu, natural gas transported via pipeline is safer, less expensive and more sustainable today than solar or wind, and certainly than coal or bunker fuel.”
An August 3 Forbes article by Bob Black noted the growth of Mexico’s natural gas importation from the US. According to the article, the Energy Information Administration (EIA) “estimates that natural gas exports to Mexico were 3% of production in April 2015 and are expected to grow to 5% by 2030.”