Challenges Facing Natural Gas Developers in Mexico
The unpredictable regulatory landscape is a risk for natural gas companies operating and Mexico. In addition, existing land use and environmental regulations may threaten the growth of natural gas transmission projects.
Currently, private firms engaged in building out natural gas storage or transportation infrastructure must obtain permits at the federal and local level. This could be a significant barrier to entry for many firms for the time and resources that are required to undergo the lengthy and complex process.
Permits Remain a Challenge for Foreign Investors
Obtaining the adequate approvals involves direct communication with CRE and ASEA, Mexico’s Security, Energy and Environment agency which focuses on environmental compliance. Permits are typically granted as a 30 year “open access” permit which allows shippers to use the distribution services if capacity is available.
For integration into the SISTRANGAS system, general terms of service (GTS) and roll-in rates must also be approved. A social impact assessment (SIA) should be completed with SENER prior to the permit authorization process. Companies are also required to obtain the adequate real estate rights to break ground on the project. Mexico Energy Partners helps companies navigate the permitting and regulatory process for large energy projects.
Fundamentals Will Likely Outweigh Politics
Though the political environment poses some challenges because of an increase in nationalist rhetoric, the reality of Mexico’s current energy situation could make it difficult for the Administration to roll back reforms as quickly. When congressional elections occur in 2021, Mexican voters could overwhelmingly support opposition party leaders who would likely block proposals that might threaten the implementation of energy reforms.
Also in Mexico Energy Insights
End users and industrial businesses are sometimes challenged by the lack of pipeline infrastructure that shuts them out of natural gas supplies in Mexico. This is an area for potential growth as either Mexican or foreign investors can seek out opportunities to build out this needed infrastructure.
The coronavirus crisis placed many businesses in the unusual position of being able to save significant amounts of money through improved energy efficiency during protracted shutdowns. There are specific best practices that firms can use to determine how much they can save, safely make the changes, and then reverse the process when business starts up again.
Specific programs were created to assist firms and households in making the transition to power-saving technology. The Eco-Crédito Empresaria is perhaps the most important for small and medium-sized businesses. This credit helps firms upgrade their equipment to more energy-efficient technology.