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Cadwalader, Wickersham & Taft LLP
www.cadwalader.com
2014 Energy & Commodities
Conference
October 8, 2014
Electric Market Update:
FERC and CFE
Panelists
• Moderators: Ken Irvin and Terence Healey, Cadwalader
• Jette Gebhart, Senior Policy Advisor to FERC Chair
Cheryl LaFleur, FERC
• Eugenio Herrera, Comisión Federal de Electricidad (CFE)
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Introducing Jette Gebhart, Senior
Policy Advisor to Chairman Cheryl
LaFleur
Cove Point LNG Export Authorization
• Fourth LNG Export Approval Granted by FERC.
• Permits export from Cove Point terminal in Maryland of
up to 5.75 metric tons of LNG/year.
• Targeted completion of Maryland Liquefaction facilities:
June 2017.
• Construction of related Virginia facilities targeted to
begin in 2016 and enter service by March 2017.
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Contention Over Cove Point
• During 2-year approval process,
FERC heard from 140 speakers at
3 public meetings related to
Environmental Assessment.
• Received > 650 comments from
the public and federal and state
local agencies on the application.
• July 14, 2014 protesters hauled off
in handcuffs.
• Balance of Environmental and
Economic.
• LNG price in Japan 3-4x U.S. Price
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Evolving Capacity Markets
• “LaFleur said capacity markets also
need to evolve and suggested that
need has become more apparent
given the changes occurring in the
power industry, including in the
generation resource mix in response
to the growth of natural gas and
renewable generation, new
environmental regulations and other
factors.”
• Boshart, Glen, FERC’s LaFleur details possible need
for capacity markets, enforcement process to evolve
(SNL, Aug. 12, 2014) (paraphrasing Chairman
LaFleur)
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New England Capacity Markets
• “The ISO-New England (ISO-NE) Forward Capacity Market
(FCM) plays a vital role in ensuring reliability in New
England. The FCM auction (the Forward Capacity Auction or
FCA) is the mechanism that ensures future system reliability
by procuring capacity resources sufficient to meet New
England’s resource adequacy needs. . . . This is especially
important in light of the current capacity situation in New
England, where for the first time the region is facing an
overall capacity shortage and the FCM must procure new
resources in order to satisfy New England’s reliability
needs.”
• Statement of Chairman Cheryl A. LaFleur, ER14-1409 (Sept. 16, 2014).
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Coordination Between Gas and
Electric
• “Questions related to gas/electric interdependency
highlight one of the central issues we face as federal
regulators—whether to encourage regional solutions, or
act to promote national solutions. We learned in the
comments and in the technical conferences that certain
gas/electric issues varied sharply by region, while
others were more national. Thus, both regional and
national actions are called for.”
• Statement of Commissioner Cheryl A. LaFleur, AD12-12 (Nov. 15, 2012)
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Heavy Investment in Natural Gas
•
“Half of power plant capacity additions in 2013 came from natural gas,” U.S. Energy Information
System (April 8, 2014), available at http://www.eia.gov/todayinenergy/detail.cfm?id=15751
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Changes to Enforcement Policy?
• “LaFleur said she is open to considering possible
reforms to the agency's enforcement processes. . . .”
• “LaFleur also acknowledged that enforcement is a
relatively new area of FERC's work. As such, ‘a lot of
things are cases of first impression, things are
happening for the first time, and it's normal that there
would be debate about it.’”
• Boshart, Glen, FERC’s LaFleur details possible need for capacity markets,
enforcement process to evolve (SNL, Aug. 12, 2014) (paraphrasing Chairman
LaFleur)
Cadwalader, Wickersham & Taft LLP
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CFE’s Natural Gas Transportation Strategy
& the Energy Reform
October 8th, 2014.
Table of Contents
1. Mexico’s Energy Reform and the CFE
2. Mexico’s Natural Gas Transportation System (Plan 2028)
3. Pipeline Biddings in the U.S. (Waha, TX.)
1. Mexico’s Energy Reform and the CFE
The new law forces the monopoly to reorganize itself horizontally and
not vertically. Private firms will be able to participate in the power
generation strengthening the competitiveness of the market.
An independent power system operator is created (CENACE) and
placed outside of CFE.
An independent natural gas pipeline system operator is created
(CENAGAS) and placed outside of CFE.
A new power and fuel market will flourish upon the mid-term.
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2. Mexico’s Natural Gas Transportation System (Plan 2028)
All natural gas projects of CFE are designed as long-term transportation
projects:
• To expand and reinforce Mexico’s natural gas pipeline network
utilized for generation of electric power and industrial usage.
• To improve Mexico’s natural gas supply chain.
• To offer all Mexican end users a wider range of opportunities to
meet their natural gas consumption needs at competitive prices.
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2. Mexico’s Natural Gas Transportation System (Plan 2028)
In construction
In construction
Pemex National Pipeline System
Sásabe
(±6,751 mi.)
Puerto
Libertad
Nueces
Guaymas
El Encino
Aguadulce
LNG Terminals
Compression Stations
Reynosa
Topolobampo
Mazatlán
Pipeline
Diameter
Sásabe - Guaymas
Guaymas – El Oro
El Oro - Mazatlán
El Encino - Topolobampo
Tlaxcala - Cuautla
Aguadulce - Reynosa
36”
30”
24”
30”
24”
42”
Capacity Distance
(MMCFD) ( ± mi. )
770
322
510
215
202
273
670
340
320
102
1,330
118
TOTAL: 1,370
Tlaxcala
Cuautla
2. Mexico’s Natural Gas Transportation System (Plan 2028)
Announcements 2014
Announcements CFE
Pemex National Pipeline System
Sásabe
San Elizario/
San Isidro
Samalayuca
(±6,751 mi.)
Waha
Presidio /
Ojinaga
El Encino
Colombia
Escobedo
La Laguna
Pipeline
Waha – San Elizario
San Isidro - Samalayuca
Samalayuca - Sásabe
Waha - Presidio
Ojinaga – El Encino
El Encino – La Laguna
Colombia - Escobedo
Diameter
42”
42”/30”
30”
42”
42”
42”
42”
Capacity Distance
(MMCFD) ( ± mi. )
1,475
178
1,450/600
14
550
330
1,350
136
1,350
150
1,500
250
1,500
150
1,208
TOTAL:
LNG Terminals
Compression Stations
2. Mexico’s Natural Gas Transportation System (Plan 2028)
Pipeline scenario assumed 2014
Naco
Sásabe
Aguaprieta
In operation CFE pipelines
In construction
Announcement 2014
Pemex National Pipeline System
San Elizario/
San Isidro
Samalayuca
Waha
Presidio /
Ojinaga
Puerto
Libertad
Nueces
Guaymas
El Encino
Aguadulce
Colombia
Topolobampo
LNG Terminals
Compression Stations
Reynosa
Escobedo
La Laguna
Mazatlán
Tamazunchale
Guadalajara
Pipeline System shift by 2028
El Sauz
Distance
( ± mi. )
Tlaxcala
Manzanillo
PEMEX (actual)
6,751
Additional to existing system
6,805
TOTAL:
13,556
Distances include not only announcements due 2014
but also future announcements by 2018
Naranjos
Cuautla
2. Mexico’s Natural Gas Transportation System (Plan 2028)
Pipeline scenario with conversion of power plants
Conversion of Thermal Power Plants
Naco
Sásabe
Aguaprieta
Puerto Libertad
Conversions according to CFE’s strategy
San Elizario/
San Isidro
Samalayuca
TOTAL Repowered MW:
Waha
Presidio /
Ojinaga
Puerto
Libertad
Nueces
El Encino
Guaymas
Aguadulce
Colombia
Francisco Villa
Topolobampo
Topolobampo II
Power Plants
for Conversion
Puerto Libertad
Río Bravo
Tula
Villa de Reyes
Mazatlán II
Topolobampo II
Francisco Villa
Manzanillo II
Cap.
(MW)
632
300
1,606
700
300
320
300
700
Reynosa
Escobedo
Río Bravo
La Laguna
Est. COD
Apr 2015
Apr 2015
Oct 2015
Dic 2015
Feb 2016
Apr 2016
Apr 2016
Nov 2016
Mazatlán
Villa de Reyes
Mazatlàn II
Tamazunchale
Guadalajara
El Sauz
Naranjos
Tula
Tlaxcala
Manzanillo
Manzanillo II
Cuautla
4,858
2. Mexico’s Natural Gas Transportation System (Plan 2028)
Pipeline scenario with new power plants due 2028
New Combined Cycle Power Plants
Baja California II &
BajaCalifornia V
Naco
Sásabe
Aguaprieta
New Power Plants at Baja California & Yucatán Clusters
and Repowering are not included
San Elizario/
San Isidro
Samalayuca
TOTAL Additional CC MW:
Waha
Norte III
Presidio /
Ojinaga
Puerto
Aguaprieta II
Libertad
Nueces
Guaymas II &
Guaymas III
El Encino
Guaymas
Aguadulce
Colombia
Norte VI &
Norte VII
Francisco Villa
Noreste &
Monterrey IV
Noroeste &
Topolobampo III
Topolobampo
Escobedo
Reynosa
La Laguna
New Power Plants
Non Central México
Norte III
Guaymas II
Guaymas III
Baja California II (SLRC)
Noreste (Escobedo)
Lerdo (Norte IV)
Noroeste (Topolobampo II)
Topolobampo III
Guadalajara I
San Luis Potosí
Mazatlán
Baja California V (SLRC)
Aguascalientes
Francisco Villa (Norte V)
Monterrey IV
Salamanca
Salamanca II
Chihuahua Sur (Norte VI)
San Luis Potosí II
Tamazunchale II
Tamazunchale III
Aguascalientes II
Norte VII
TOTAL MW:
Cap.
(MW)
954
735
735
276
1,034
990
847
700
908
862
867
522
872
958
1,088
680
680
958
862
1,121
1,121
872
867
19,509
23,695
COD
Jul 2017
Apr 2017
Jul 2017
Jul 2017
Dec 2017
Apr 2018
Apr 2018
May 2018
Apr 2019
Apr 2019
Apr 2020
Apr 2020
Apr 2020
Apr 2021
Apr 2022
Apr 2022
Apr 2023
Apr 2024
Jun 2024
Jul 2025
Apr 2026
Jul 2027
Jun 2028
New Power Plants
Central México
Valle de México II
Centro II
Central (Tula)
Valle de México III
Central II (Tula)
Lerdo
Mazatlán
San Luis Potosí &
San Luis Potosí II
Mazatlàn
Aguascalientes
Guadalajara
Manzanillo
Tamazunchale II &
Tamazunchale III
Tamazunchale
El Sauz
Guadalajara I
Salamanca &
Salamanca II
Cuautla
Naranjos
Tlaxcala
TOTAL MW:
Cap.
(MW)
601
660
1,162
601
1,162
4,186
COD
May 2017
Sep 2019
Apr 2021
Apr 2023
Apr 2024
3. Pipeline Biddings in the U.S. (Waha, TX.)
As a result of the Energy Reform, and the competitiveness that the
market will require for power generation, CFE requires natural gas
transportation systems with reliable and diversified sources of supply.
Today,
Mexico’s
natural
gas
supply
is
concentrated
in
the
Northeastern-Gulf side of the country, which brings limited flexibility
and supply options.
The development of alternate routes along the border between the
U.S. and Mexico will strengthen market capabilities and will help to improve
operational margins.
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3. Pipeline Biddings in the U.S. (Waha, TX.)
Waha – San Elizario (November 2014)
• Development, construction and operation of a Header “CFE Waha Header”
for 2.825 Bcf/d, with at least 10 interconnects to existing pipelines near
the Waha Hub area that supply at least 130% of the maximum aggregated
capacity of these pipelines (130%*2.825 Bcf/d).
• Development, construction and operation of a pipeline with capacity of 1.475
Bcf/d from CFE Waha Header to United States Border with Mexico near San
Elizario, Texas.
C.O.D. : January 2017
Diameter: 42”
Capacity (MMCFD): 1,475
Length (approx) : 225 Miles
MAOP (psig): 1,440
• Border crossing and permits to interconnect with a future pipeline that runs from
San Isidro to Samalayuca, both located in the State of Chihuahua, Mexico.
• Minimum pressure of delivery at the international border at 1,145 psig.
• 25-year Transportation Service Agreement (“TSA”). At the end of the
agreement, CFE and the Transporter will enter into a Joint Venture
agreement and CFE shall own 49% of the equity.
Fiber optic lines that will service the telecommunication needs of the pipeline, which will run parallel to it.
Design, development, construction and operation of the Fiber Optic Lines must be included in the tariff of the TSA.
RFP final stage schedule
Due
Submission of final proposals (Houston, Texas, exact location TBD)
November 14, 2014
Announcement of winning bidder (Houston, Texas, exact location
TBD)
December 5, 2014
Execution of TSA (Mexico City, Mexico, exact location TBD)
January 16, 2015
(All dates and requirements may change
subject to the final specifications of the
corresponding RFP.)
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3. Pipeline Biddings in the U.S. (Waha, TX.)
Waha – Presidio (November 2014)
• Development, construction and operation of a pipeline with capacity of 1.350
Bcf/d from CFE Waha Header to United States Border with Mexico near
Presidio, Texas.
• Border crossing and permits to interconnect with a future pipeline that runs from
Ojinaga to El Encino both located in the State of Chihuahua, Mexico.
• Minimum pressure of delivery at the international border at 1,160 psig.
C.O.D. : March 2017
Diameter: 42”
Capacity (MMCFD): 1,350
Length (approx) : 145 Miles
MAOP (psig): 1,440
• 25-year TSA. At the end of the agreement, CFE and the Transporter will enter
into a Joint Venture agreement and CFE shall own 49% of the equity.
• Fiber optic lines that will service the telecommunication needs of
the pipeline, which will run parallel to it. Design, development, construction
and operation of the Fiber Optic Lines must be included in the tariff of the TSA.
RFP final stage schedule
Due
Submission of final proposals (Houston, Texas, exact location TBD)
November 14, 2014
Announcement of winning bidder (Houston, Texas, exact location
TBD)
December 5, 2014
Execution of TSA (Mexico City, Mexico, exact location TBD)
January 16, 2015
(All dates and requirements may change
subject to the final specifications of the
corresponding RFP.)
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3. Pipeline Biddings in the U.S. (Waha, TX.)
Bidding essentials
•
Commitment Bond and Performance
•
Specific experience criteria to be met by the Bidders on
development, construction, operation, permitting,
routing (ROW’s) and financing for similar natural gas
transportation projects in the US
•
Governing Law: State of Texas
•
Language: English
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