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Mexico's CFE reconsiders gas storage after outage
2/16/2021

Mexico's state power utility CFE plans to develop a fuels storage policy in order to mitigate future gas supply shortages such as those that triggered power outages across northern Mexico yesterday.

CFEnergia, CFE's fuels division, will develop "a strategic commercial and operative storage policy that will minimize negative impacts of abrupt price movements and drastic variations in the volumes ordered by Mexico to generate electricity," director Miguel Reyes said in a CFE board meeting yesterday.

Shortages in natural gas supply following record cold weather in Texas sparked power outages across northern Mexico yesterday affecting 4.7mn customers. Power supply has been re-established to around 80pc of customers, President Andres Manuel Lopez Obrador said today, but full service is not expected to resume until 18 February.

Mexico is heavily dependent on US pipeline imports for electricity generation as domestic gas production has declined over the past decade. Imports of 5.52 Bcf/d covered 68pc of consumption in November 2020, according to the latest government data. But the country has no storage facilities, leaving it vulnerable to operational disruptions,despite both the public and the private sector having flagged the issue for years.

CFE's storage policy would "provide better operational flexibility" and "provide a protection mechanism in the face of price volatility," CFE said.

Gas prices soared by more than 200 times to $600/mmBtu in some areas in the US yesterday, a situation that will see CFE incur additional costs of Ps20bn ($1bn), Reyes said.

Lopez Obrador's government abandoned plans to build 45 Bcf of commercial storage by 2026 with outside investment in favor of a more limited proposal that would include 3 Bcf of storage in salt caverns in Shalapa, Veracruz state and 3 Bcf at the Altamira LNG terminal, overseen by state pipeline operator Cenagas.

CFE did not detail specific storage proposals or timelines or clarify if its program will be in addition to the Cenagas proposals.

In the meantime, CFE plans on ordering more LNG into its Altamira and Manzanillo terminals — the utility has issued two tenders in recent days for delivery by 25 February — to balance supply. CFE also plans on contracting "a broad hedging strategy to guarantee fuels prices," but provided no further details.

By Rebecca Conan


https://www.argusmedia.com/en/news/2187375-mexicos-cfe-reconsiders-gas-storage-after-outage