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Latin America: living la vida loca? (Part 1)

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World Pipelines,

While the global oil and gas sector has been experiencing a plethora of challenges, Latin America is in a league of its own. Here, the industry dances to an animated tango of complications that have created both tremendous opportunities and significant barriers.


When Mexico’s President Enrique Peña Nieto cancelled the state monopoly in hydrocarbons, few could have predicted the rapid pace at which the sector has evolved. What was once the sole domain for state oil company, Pemex, has been transformed as open bidding on leases, joint ventures (JVs), farmouts and divestitures have created a flurry of interest.

As part of its demonopolisation process, Mexico created CENEGAS, which now owns and controls most of the country’s natural gas pipelines and related infrastructure. The company has acknowledged that it needs outside investment and expertise.

TransCanada is a heavy investor in Mexico’s midstream industry. By 2018, it will have devoted US$5 billion in eight gas pipelines totalling 3000 km and with a capacity of 7.3 billion ft3/d. One of the major upcoming projects is the Sur de Texas-Tuxpan pipeline, a JV between TransCanada and Sempra Energy’s Mexican subsidiary, IEnova. The 42 in. pipeline will run 497 miles offshore, from Brownsville (Texas, USA) to Tuxpan (Veracruz, Mexico). The two companies will build, own and operate the pipeline under a 25 year contract with the Comisión Federal de Electricidad (CFE), Mexico’s state electricity provider. The 2.6 billion ft3/d line is expected to enter service by late 2018.

Mexico possesses vast natural gas resources and the Eagle Ford Shale in Texas extends into the north of the country. While the majority of Mexico’s 5.5 billion ft3/d production is associated with oil production, the country imports 2.7 billion ft3/d (mostly from the US), but this number is expected to grow dramatically. Increased consumption will be driven by a switch from oil to natural gas as the fuel for electricity, as well as strong growth in the automotive, manufacturing and aerospace sectors.

As a result, US gas pipeline capacity into Mexico is expanding rapidly. The bulk of the expansion has occurred in Texas, where prolific shale plays have created an abundance of exportable gas.

Refined products pipeline networks are also growing. Dos Aguilas Pipeline, a Mexican subsidiary of Howard Midstream, is building an open access network to transport refined products from the Laredo region (Texas) to northern Mexico. The network includes the Border Express pipeline (141 miles), the Borrego pipeline (10 miles), the Poliducto Frontiers pipeline (12 miles) and the Poliducto del Norte pipeline (124 miles). The company expects the network to be in service by mid 2018.

As in many countries, pipeline construction in Mexico faces complications from indigenous peoples. In late 2016, violence broke out among Yaqui groups over a gas pipeline being built in the Sonoran state in northwest Mexico. The pipeline is being built by IEnova to transport gas from Arizona to CFE plants. While some communities are for this project, others against, which has generated several other violent conflicts.

Most observers agree that Mexico has taken many positive steps to modernise and grow its oil and gas infrastructure. While no one doubts there are many challenges ahead, the country can be lauded for the immense reforms that have already been successfully achieved.


Argentina possesses tremendous hydrocarbon assets. Thanks to international and state investments through Yacimientos Petrolíferos Fiscales (YPF), the country produced 900 000 bpd and 4.5 billion ft3/d in the early 2000s, delivering output through 6000 km of crude pipelines and almost 30 000 km of gas lines.

However, during the Kirchner regimes, Argentina’s oil and gas sector was partly renationalised and generally mismanaged, to the point where production fell to its current levels of 523 000 bpd and 3.5 billion ft3/d of oil gas, respectively.

Thanks largely to unconventional resources, the country is now experiencing a renaissance. The EIA estimates that the country could contain up to 774 trillion ft3 of recoverable shale gas and 21 billion bbls of shale oil, mostly in the Vaca Muerta formation in the Neuquen basin.

Chevron and its JV partner YPF have been drilling exploratory wells in the Vaca Muerta in order to assay its production potential. Longer laterals, more fracture stages and increased proppant usage have helped boost individual new well production to 2 million ft3/d.

Investment in midstream capacity is also starting. Recently, the state Energy and Mines Ministry announced a US$260 million tender for the acquisition and transportation of equipment to build the Gasoducto Regional Centro II and extend the Gasoducto de la Costa (Costa) and Sistema Cordillerano-Patagónico pipelines. The Gasoducto Regional Centro II pipeline will be connected to the existing Gasoducto del Noreste Argentino pipeline, and service Sante Fe province. The Costa line will extend to the Atlantic and the Cordillerano-Patagónico will be extended to consumers in the Andes.

Part 2 coming soon!

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