Sempra Considers Making Bid for Mexican Gas Pipeline Project

By Laurence Iliff

MEXICO CITY--San-Diego-based Sempra Energy (SRE) is looking at new projects in Mexico, officials said Thursday, including a possible bid on a 740-kilometer (460-mile) natural gas pipeline that state-owned oil company Petroleos Mexicanos, or Pemex, is putting on a fast track in order to get cheap gas from the southern U.S. to growing industries in central Mexico.

"Yes, it interests us," said Carlos Ruiz Sacristan, the chairman and chief executive officer for Sempra's Mexico unit Ienova (IENOVA.MX), which was listed on the local stock exchange in March.

The planned pipeline from the Agua Dulce gas hub in Texas to central Mexico is in three parts, and Pemex is currently seeking bids for the longest section, which runs from Los Ramones in the northern state of Nuevo Leon to Guanajuato and is expected to cost around $1.8 billion.

Sempra already has a contract with Pemex for the second part of the pipeline, which was not put out to bid because it is being constructed as part of a Pemex joint-venture.

Sempra is also working on pipeline projects for the state electricity company Comision Federal de Electricidad, or CFE, which is building a natural gas pipeline down the Pacific side of Mexico. Pemex's pipeline runs down the Gulf side.

Debra L. Reed, Sempra Energy's chairman and chief executive, said at the news conference that the company is currently working on investments worth $1.5 billion in Mexico, including sections of the CFE pipeline. Sempra already has $2.5 billion invested in the country, including a liquefied natural gas regasification terminal in Baja California that supplies CFE.

Ms. Reed said the U.S. shale-gas boom has been a game-changer for the North American energy market, including Mexico, which will benefit from the lower-cost gas, which is also more environmentally friendly that fuel oil or coal.

Mr. Ruiz said the company sees lots of opportunities in Mexico, including wind farms and solar energy.

While Mexico maintains a state monopoly on oil and gas production, the transportation and distribution of natural gas, including LNG plants, has been open to the private sector for years. The new pipelines will provide greater opportunities to build distribution networks in more Mexican cities to provide piped-in gas to homes, Mr. Ruiz said. Currently most Mexican homes use tanks of liquefied petroleum gas.

Mexico's natural gas production has fallen in recent years along with a drop in oil production by Pemex, which hasn't been able to meet demand for the fuel by industry.

Pemex estimates natural gas imports from the U.S. will more than triple by the end of 2015 as the new natural-gas pipeline projects come online.

Write to Laurence Iliff at [e-mail]

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