Challenges facing gas developers
Permitting delay is a buyer's problem, not just a developer's
Industrial facilities in Mexico that want natural gas at a lower delivered cost usually discover that the constraint is not the molecule. It is a permit. A plant that needs a new lateral, an interconnection, or on-site storage is asking a private developer to complete a federal permitting sequence that runs through CRE, ASEA and SENER, and that sequence sets the earliest date the plant can change its fuel economics.
The result is that gas permitting timelines belong in a capital plan, not in a regulatory summary. If the answer to "when can this site get firm gas" is three years, the decision in front of the CFO is what to do for three years, and that is a different question from whether the project is worth building.
We think the more useful framing for an industrial buyer treats the permitting process as a schedule risk you either accept, transfer to a developer, or design around by contracting capacity on a system that already exists.
What the permitting sequence actually contains
Private firms building natural gas transport or storage infrastructure need authorizations at federal and local level, and the federal pieces are the ones that set the schedule.
- CRE, the Comisión Reguladora de Energía, issues the permit for transport, storage or distribution and approves the tariff and the terms of service. Under the Reglamento de las actividades a que se refiere el Título Tercero de la Ley de Hidrocarburos (DOF, 31 October 2014), those permits run for up to thirty years from the date of grant (Article 11), the service is subject to open access on terms that are not unduly discriminatory (Article 10), and available capacity is allocated through a temporada abierta run under the approved terms of service (Article 74).
- ASEA, the Agencia de Seguridad, Energía y Ambiente, authorizes the industrial safety and environmental protection side. ASEA is a decentralized body of SEMARNAT and its remit is the hydrocarbons sector.
- SENER receives the social impact assessment covering communities affected by the route or the site, which should be completed before the permit authorization process concludes.
- Land rights. The developer must hold real estate rights over the whole route or footprint before breaking ground, which in practice means negotiating with ejidos and private owners parcel by parcel.
For a project intended to connect into SISTRANGAS, the integrated national transport and storage system operated by CENAGAS, there is a further step. General terms of service and the roll-in of the new asset's rates into the system tariff must both be approved. CENAGAS is the independent manager and operator of SISTRANGAS and the party that allocates capacity on it. CRE is the regulator that approves what the service costs. Naming the right counterparty for each question saves months.
Where the schedule risk lands on the P&L
A plant waiting on new gas infrastructure is not standing still. It is paying the difference between the fuel it has and the fuel it wants, every month, plus whatever premium interruptible service carries in a cold week. Three lines make that concrete:
- The fuel spread. Delivered natural gas against the diesel, LPG or fuel oil the site burns today, converted to a common heat basis in USD per MMBtu, multiplied by annual consumption. CRE's Índice de Referencia Nacional de Precios de Gas Natural al Mayoreo gives a published monthly wholesale benchmark in USD per MMBtu to anchor the gas side.
- The interruption cost. Replacement fuel plus the gross margin on production hours the site cannot cover if service is curtailed. This is what firm transport is worth, and it is the number most plants have never calculated.
- The waiting cost. The fuel spread multiplied by the number of months the permitting sequence adds. As an illustration only, a two-year delay on a project worth USD 1.5 million a year in fuel savings costs USD 3 million in foregone savings before anything goes wrong. The figure depends entirely on the site's consumption and its own fuel spread.
Those three lines convert a regulatory topic into a budget item. They also tend to change the answer. A site that has priced its waiting cost often finds that contracting capacity on an existing system at a worse tariff beats waiting for a better one.
The choice an industrial buyer actually faces
There are three routes, and the trade-offs are not symmetrical.
Contracting capacity in an open season on an existing system is the fastest route and carries no permitting exposure, but it depends entirely on whether capacity is offered where your plant sits. Contracting a developer to build and hold the permit transfers the schedule and permitting risk to a counterparty, at the cost of a tariff that has to earn a return on that risk, and with the developer's balance sheet as your protection if the schedule slips. Building and permitting the asset yourself gives the lowest long-run unit cost and full control, and it makes your company a permissionario with CRE reporting obligations, ASEA safety compliance and open access duties toward third parties. Most industrial firms underestimate that last consequence.
The related decision on the electricity side is whether gas exposure should be hedged through on-site or contracted gas storage, and how the site's power supply is itself exposed to imported gas in the dispatch mix.
What could change the picture
Permitting has become slower and less predictable as federal energy policy has shifted, and a firm relying on a three-year schedule should test what a five-year schedule does to the investment case. On the other side, the underlying demand for gas in Mexican industry has not moved, and the open access and tariff framework in the Reglamento remains in force. Policy pressure changes how quickly permits move. It has not so far changed the rules a permit is granted under. Plan on the timetable, not on the statute.
Test the timetable before you commit the capital
Mexico Energy Partners reviews gas supply options for industrial sites, including which permitting route a project needs, what a realistic schedule looks like, and what the waiting cost is against the site's current fuel. An initial review needs twelve months of fuel and electricity billing, the site's hourly consumption profile, and the location and voltage or pressure of the existing service connection. Related work is described under regulatory and policy advisory and energy procurement.