Fernando Calvillo and Manuel Calvillo on natural gas in Mexico | Fermaca | Video

World Finance interviews Fernando Calvillo and Manuel Calvillo from Fermaca about the transportation of natural gas in Mexico

March 28, 2014

Interest in Mexico’s natural gas has increased substantially over the last five years, due to the price increase of other traditional hydrocarbon fuels. As a result, methods of delivery have also increased. Fernando Calvillo and Manuel Calvillo from Fermaca, an established company in the country’s energy and construction sector, discuss the logistics of transporting natural gas in Mexico.

World Finance: Well Fernando, if I might start with you, Fermaca of course leads the way in terms of the transportation of natural gas, but why is this infrastructure so important for Mexico?

Fernando Calvillo: Today, if you see Mexico, it’s population is growing. We have 115m people, and we have more than 4000 km of border with the most important consumer in the world, which is the US. Obviously, the commercial relationship between out two countries is extremely important, and that way we need to obviously offer energy in order to be competitive.

So building infrastructure today and having access to the cheapest gas in the world, which is in the United States, helps us in order that we can be extremely competitive. If you see Mexico today, the population who runs the country is between 18 and 40 years, so we have an economy that is growing, and having the infrastructure behind the industrialisation of the country, the name of the game obviously is to build infrastructure, and mostly pipelines which natural gas today is the cheapest fuel on earth.

World Finance: You provide transportation to one of the key urban industrial areas in central Mexico, and you’re also building a pipeline in the north with interconnections to the United States. What’s the significance of this for the Mexican oil and gas sector?

Fernando Calvillo: One of the things is that we provide to the second largest industrial market, which is the city of Toluca, state of Mexico, and that project was in operation since 13 years ago. It was our first natural gas project as an operators and owners. The second project that we had, that actually we have now in operations, which is the Tarahumara pipeline can move up to 20 percent of the consumption of the gas of the country.

So this asset is extremely important because, in the north part of Mexico, there’s an important hub of productions of electricity, which we will be able to supply, and we have the flexibility to go and interconnect our system with very liquid hubs of natural gas with a very cheap price. So as we are an independent pipeline company, we can be importers of gas, and we can take advantage of being in that competitive fuel to Mexico.

World Finance: Well what sort of challenges did you have to overcome for this project?

We had to league with seven banks, and it was the first pipeline project to be financed by this type after the Lehman Brothers crisis

Fernando Calvillo: Putting together the financing, we did in house all the financing. We had to league with seven banks, and it was the first pipeline project to be financed by this type after the Lehman Brothers crisis. So it was a challenge to the acquisition of the rights of way, the logistics of the project, and obviously due to the security, we have problems with the security of the border of Mexico, to take care of our people. So I think those were the four challenges that we faced but, even though that happened, we had zero accidents, zero incidents, and the pipeline was in service one day before it was request our client.

World Finance: Well Manuel, Fermaca guarantees an uninterrupted supply of natural gas, how do you ensure this?

Manuel Calvillo: You know that it’s on our service, the pipeline has a reliability of 99.97 percent, so actually how we do it is that we run a state of the art operation, we have our automatisation system, which is called a SCADA system. Basically we are the only pipeline company I would say within Mexico that we have our own satellite signal, so we don’t rent from a third party. So we ensure that, by having 24/7, 365 operators in Mexico, which they are reading in front of computers all the time, we run the system live so we can know parameters like pressure, temperature, humidity of the gas, in real-time. And by doing that, we can ensure 100 percent of reliability on our systems.

World Finance: Well Fernando, of course there is rising demand for oil and power in the region, so how do you manage things like prices and shortages?

Fernando Calvillo: Unfortunately, the production of oil and gas in Mexico has been declining because our main sources of productions, obviously, they’re going down. I think our current President, President Peña Nieto, has been extremely smart, and he’s built bridges in order to pass the energy reform, which today that’s quite the name of the game, because Mexico was very close to private investment on the production of oil and gas.

Right now, the government is working on the secondary loss in order to see how this going to work, but in the case of natural gas I think we will be very eager to build different structures around the US so we can have access precisely to gas, and make our corridor an important utility for the production of electricity as my brother said, and as well what we want is to develop a set of industries all around so we can make an important industrial hub around these 400 km of pipeline that we have.

World Finance: Gentlemen, thank you.

Both: Thank you.