In Mexico, LNG supply through virtual pipelines

Mexico

Caio Zapata, CEO of Énestas Raw Materials & Fuels, talks to The Energy Year about present hurdles Mexico’s energy industry needs to overcome and what the company is doing to improve natural gas logistics and increase access to LNG in the country. Énestas Raw Materials & Fuels is a gas distribution company specialising in LNG supply through a virtual pipeline network.

What challenges does Mexico’s energy industry currently face?
Mexico needs to enhance the in-country utilisation of gas. However, the country currently lacks the means of distribution. Mexico probably has the same GDP as the state of Texas but one-tenth of the pipelines. There is plenty of work to be done in the gas distribution sector.
The advantage of natural gas is that it’s cheaper than alternative options such as propane diesel and fuel oil. It emits the least carbon dioxide of any hydrocarbon, which resonates with the Paris Agreement and the global energy transition. There are new developments in renewable natural resources that are net zero and even net positive.

How would you assess the awareness of the benefits of using natural gas in Mexico?
In every market, there needs to be innovators and early adopters to see if new technologies will work. In a market like Mexico, which tends to be relatively conservative, education and advocacy are vital to make people understand that natural gas is cleaner, safer and cheaper. Word of mouth is crucial, and it will gradually begin getting traction.
The process of creating a market for natural gas is complex and gradual. Once you start having success with one type of customer or region, it gets easier. However, the first stage of knocking on doors and breaking the ice is slow moving.
The market is here, and more so considering the population in Mexico and their high demand for energy. At the same time, the competition is starting to mushroom given the potential. The advantage we have is that we are the first pioneers. We have had the ball rolling for a few years and know the intricacies and potential of this market. We have great flexibility and the ability to mobilise equipment and teams.

What is Énestas Raw Materials & Fuels doing to bolster Mexico’s natural gas market?
Our work is to get natural gas to end customers via pipelines, roads, trains or ships. Currently, we own around 80 trailers to move LNG. We have two niches that we serve. The first is the average customer connected to the natural gas pipeline network as a wholesaler of natural gas. Secondly, we sell LNG in the small-scale market to companies that are not connected to the pipeline grid. We service the mining, transport, greenhouse, power generation and shipping sectors.
We originally set out to do cogeneration projects but switched gears and bet on small-scale liquid natural gas given gaps in the market. We now have terminal stations, pipelines and small-scale LNG assets. We provide turnkey solutions; we build stations, convert equipment, cover logistics and take gas to the end user. We bring LNG from different sources and locations. Our product offering is rich and diverse.
An interesting area for us is modular terminals. These are not the standard, traditional flat-bottom tanks. They are small-scale, movable and one can expand their volumes. Modular terminals are around one-fifth of the volume of a big tank and one-tenth the cost. They allow medium-sized and small customers to improve logistics and infrastructure and be closer to their raw materials or fuels.
In January 2021, we began operations in the port of Coatzacoalcos, Veracruz, with a liquid ethane terminal that is able to be used for LNG. It was fit to add the asset to our portfolio because we had knowledge and equipment to operate with this type of cryogenic fuel. There is a much larger spectrum than just being dedicated to fuels like natural gas. We are exploring these opportunities for other liquids.
Companies have different ways of importing raw materials, some by train or some by trailer. We offer the chance to improve our client’s logistics. We build inventory, take care of the logistics and sell products. We see what is most convenient for clients in logistics terms, be it ship, train or truck.
There is currently an over-demand and Pemex is the sole supplier, which can lead to challenges if customers don’t receive the supply. We have ISO containers for ships and trucks. We can also build terminals where necessary. Since these terminals or stations are modular, they can be put wherever our clients want.

Are you aiming to establish liquefaction plants?
This is one of our medium-term goals. To do so we first planned to develop the market and then proceed by raising volumes. This will materialise our vertical integration strategy. Today there is enough volume to justify a couple of liquefaction facilities. We already have the land, and we are waiting for the final permits. Once these are completed, we will start issuing purchase orders.
Mexico’s market demand justifies several liquefaction facilities. Our ultimate goal is to cover all of Mexico. To do this we need to carefully select our locations. We are aiming to establish the first in the Bajío region, and from there we are looking into other regions of Mexico that lack access to natural gas.

What is the company’s growth strategy in Mexico and abroad?
Our mission is to create competitive access to raw materials and fuels. The different terminals and stations we offer are creating this. There are other types of products we could leverage beyond liquid ethane and ammonia given our knowledge; we have other projects in the pipeline. We need to diversify from just working with LNG and are currently monitoring opportunities. Our diversification is highlighted in our recent rebranding as Énestas Raw Materials & Fuels.
We hope to have at least three to four liquefaction facilities soon. The lack of accessibility and availability of natural gas is a problem present not only in Mexico but across the Americas. We would like to expand into other emerging countries, especially in Central America. We must analyse opportunities and challenges in these markets to determine the next step.

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