Thursday, November 15, 2012

Another Export Angle

Kinder Morgan yesterday announced today a 25-year transportation precedent agreement to provide approximately 200 MMcf/day to customers in Mexico through a new 60-mile 36" diameter pipeline that will run from existing mainlines near Tucson, AZ to Sasabe, AZ, which sits at the Mexican border.  The pipeline would then interconnect with a new 500 mile cross-border pipeline being built by Sempra to Guaymas in the Sonora state.  The gas would be used to fuel power plants that are being converted from fuel oil to natural gas.

The proposed pipeline is the result of a request by the Mexican government to build transportation infrastructure to import U.S. natural gas.  Mexico has its own natural gas reserves, including shale, but I guess it is cheaper, easier and faster to import U.S. gas.  Interesting.

The proposed Sasabe pipeline will require Federal Energy Regulatory Commission (FERC) approval and a presidential permit for the border crossing.  Regulatory filings are expected in early 2013.  If approved, construction would begin in Q1 2014 with the first gas flowing in September 2012. 

While 200 MMcf/day is not a massive new demand source, projects like this help diversify the "demand portfolio" for natural gas.  It will be interesting to see if this approval gets caught up in the politics over the export of LNG since it requires a presidential permit.  It might slip under the radar.  Or not.

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