Government Awards Concessions for Natural-Gas Distribution in Mexico City & Surrounding Areas

SourceMex Economic News & Analysis on Mexico, August 5, 1998 | Go to article overview

Government Awards Concessions for Natural-Gas Distribution in Mexico City & Surrounding Areas


In late July and early August, the Comision Reguladora de Energia (CRE) moved ahead with several major projects to expand distribution of natural gas in Mexico.

In the most prominent project, the CRE awarded separate contracts to Consorcio Proyecto Energia and Consorcio Mexigas to distribute natural gas in the Mexico City metropolitan area.

Proyetos de Energia de Mexico (PEM)--a partnership formed by US-based Lone Star Gas International and Mexican companies Grupo Diavaz and Controladora Comercial e Industrial--won the concession to construct an 83-km pipeline to serve residents of the Federal District, which extends to the city limits of the Mexican capital. Lone Star Gas has a controlling interest in the partnership with a 70% share.

The CRE awarded the second concession in the Mexico City area to Consorcio Mexigas, a joint venture formed by Gaz de France and Mexican construction company Bufete Industrial. The consortium will construct a 430-km pipeline to serve residents of the Cuautitlan-Texcoco region in Mexico state, just outside the city limits of the capital.

Consorcio Mexigas spokespersons Miguel Favela and Pierre Cochet said the partnership opted for the Cuautitlan-Texcoco concession because of the strong potential for increased demand from industrial users. Demand for natural gas in areas just outside Mexico City is expected to grow by between 8% and 10% annually over the next several years.

Consorcio Mexigas and PEM won the concessions over a partnership formed by Spain's Grupo Repsol, Gas Natural de Mexico (GNM), US-based Houston Industries, and Mexico's Grupo Gutsa. Repsol and its Mexican subsidiary GNM have already received a number of concessions to construct pipelines and supply natural gas to residents of northern cities in Mexico.

The two winning consortia each pledged to invest US$500 million in the projects, which will service 650,000 users within five years. Consorcio Mexigas and PEM spokespersons said the two consortia will employ special safeguards in constructing their pipelines to prevent serious damage in the event of an earthquake.

Federal and local authorities hope to convert most households in the Mexico City area to natural gas by 2013. This will require investments of about US$4 billion over the 15-year period, said Angela Fuentes, president of the Asociacion Mexicana de Gas Natural (AMGN).

The switch to natural gas is expected to reduce pollution, since the fuel is cleaner and safer than the liquified petroleum gas (LPG) used by most households in the capital and surrounding areas. …

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