Mexico to Eliminate Tariffs on U.S. & Canadian Natural-Gas Imports by July

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The Mexican government has announced plans to eliminate a tariff on imports of US and Canadian natural gas earlier than scheduled to compensate for a potential energy shortage in northern areas of the country. The 4% tariff will be scrapped July 1. If Mexico had followed the timetable spelled out under the North American Free Trade Agreement (NAFTA), the tariff would have remained in place until 2003. The government had planned to eliminate the tariff at the end of 1999, but moved up the date to the middle of the year to boost supplies of natural gas in the rapidly growing industrial areas of northern Mexico. "Eliminating the tariff will improve the quality of energy available both to the industrial sector and to the public at large," Energy Secretary Luis Tellez Kuenzler said at a business and energy conference in Monterrey. As part of the plan to scrap the import tariff, President Ernesto Zedillo's administration is scheduled to release, for the first time ever, regulations spelling out a price structure for transporting natural gas and for access to pipelines owned by the state-run oil company PEMEX. The lack of specific regulations was as much a hindrance to new investments in the natural-gas sector as the import tariff. "This is very good news that will surely spark new cooperative projects along the US-Mexico border," said Hector Olea, director of the Comision Reguladora de Energia (CRE). Opening the natural-gas market will allow US companies like KN Energy and Sempra Energy to proceed with projects that had been suspended. KN Energy had placed on hold the construction of a 92-mile gas pipeline connecting Roma, Texas, with Monterrey because of the high tariffs and lack of regulations. KN inherited the project after acquiring Texas- based MidCon Corp. in October 1996. "Lifting these tariffs greatly improves the economic feasibility of our projects and in turn opens the door wider to greater opportunities," said KN Energy's business development analyst Delia Gallardo-Barnett. Sempra Energy recently won a concession to construct and operate a US$40 million natural-gas distribution system in Durango and Coahuila states and should benefit from the elimination of the tariff. Sempra will rely on natural gas imported from the US to serve both its new Coahuila-Durango pipeline and an existing distribution system in Chihuahua state. …