Never mind Mexico’s oil reform. These days, the action is in natural gas. Since last year, when new laws made it easier for foreign companies to export gas to Mexico, there’s been more than $10 billion of planned or completed pipeline investments announced by companies such as Dallas-based Energy Transfer Partners LP.
On Monday, Juno Beach, Florida-based NextEra Energy Partners LP agreed to a $2.1 billion acquisition of closely-held NET Midstream, owner of seven pipelines including a 120-mile stretch that runs from Texas to the Mexican border. Tumbling crude prices have damped prospects that the Mexican oil-drilling laws adopted last year will spur an investment boom.
Instead it’s the surge in gas-pipeline construction that’s attracting foreign capital, expanding the market for U.S. gas producers and meeting growing demand from Mexican manufacturers and power plants.
The pipeline construction “is similar to building a first- class highway system,” Glenn Pinkerton, a partner at Sidley Austin LLP who has worked on Latin American energy financing and infrastructure projects, said in an interview.
Just last week, Infraestructura Energetica Nova, a unit of San Diego-based Sempra Energy known as Ienova, agreed to pay $1.325 billion for a 50 percent stake in Gasoductos de Chihuahua, which operates a 73-mile pipeline between the northern states of Nuevo Leon and Tamaulipas.And more:
Kinder Morgan Inc., the largest U.S. pipeline operator, is doubling the size of its U.S.-Mexico pipeline, while Tulsa, Oklahoma-based Oneok Partners LP said it would spend as much as $100 million on an expansion to Mexico.
The past year’s drop in crude prices by more than half has dimmed private oil producers’ appetite for Mexico, which was supposed to draw an estimated $62.5 billion of energy investments through 2018. In an oil-rights auction last month, the first in the nation’s history, only two of 14 drilling blocks drew sufficient bids to win a contract.
With gas, there’s been less hesitation.