Fracking fuels opportunity in Mexico

Mexico?s energy landscape is rapidly being transformed by the boom in U.S. natural gas production ? and no company may be better poised to profit than a Mexico unit of San Diego-based utility holding company Sempra Energy.

Infraestructura Energ?tica Nova, better known as IEnova, has emerged as a key investor and strategic partner in Mexico?s rapid expansion of its natural gas transport network.

Gas interconnections are being added at the U.S. border and pipelines extending south, as Mexico races to keep up with rising electricity needs while retiring costly oil-burning power plants.

Shortfalls in electricity generation in Mexico led to 22 critical alerts last year in which industrial users were asked to reduce natural gas consumption, according to Mexico?s energy ministry, costing the economy an estimated $1.5 billion. Without significant investments, the power shortfall is forecast to grow.

Under that panorama, Sempra has recognized an outsized business opportunity in Mexico, where it already has invested $2.4 billion in energy infrastructure projects.

Eager to make new investments, Sempra took its Mexico holdings public in March on the Mexican stock exchange, raising roughly $600 million.

IEnova shares now trade about 50 percent above the initial offering price, with quarterly results due out today.

Sempra retains an 81 percent interest ? now worth about $3.7 billion.

The offering built on suspense surrounding a push by Mexican President Enrique Pe?a Nieto and his political allies to open investment in oil and gas exploration 75 years after the sector was nationalized.

Nearby IEnova assets include a 600 megawatt natural gas power plant outside Mexicali that delivers power to San Diego area utility customers. The company placed turbine orders earlier this year for the first phase of a wind farm just south of the U.S. border at La Rumerosa that could eventually extend for a hundred miles along the windswept high plains of Baja California.

Current construction projects include a major natural gas line leading south from Arizona through Sonora and Sinaloa states ? an effort designed to unlock economic and industrial growth in a region stymied by energy constraints.

?It involves over 500 miles of route, so there?s right-of-ways, there are permits, there are interconnections with the U.S. border, there are interconnections you have to do with certain power plants as you go,? said George Liparidis, CEO of Sempra International, which oversees businesses in Mexico, Peru, Chile and Argentina. ?It is complex ? but that?s our core competency in Mexico. If you look at what we have been doing the last 15 years, it is licensing, developing and building and operating pipelines.?

At the opposite end of the country, IEnova is part of a joint venture building an ethane pipeline across portions of Chiapas, Tabasco and Veracruz states designed to invigorate Mexico?s petrochemical industry.

In its biggest bid for business to date, IEnova is seeking a leading role in the construction of the 750-mile Los Ramones natural gas pipeline from the Texas border through the rugged Huasteca region into Guanajuato state. The company already is part of a joint venture building the first short segment, and is preparing a bid on the lengthier second phase ? a nearly $2 billion proposition.

Source: http://www.utsandiego.com/news/2013/jul/26/fracking-fuels-opportunity-Mexico/

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