BORDER ENERGY SPECIAL

Ronald Buchanan
Publicado Octubre 12, 2009

The winding road between Mexicali and Tecate in Baja California runs through La Rumorosa, a stretch of bizarre rock formations amid desert baked in summer by the sun and freezing cold in winter time.
Once a drovers’ trail celebrated in song by the late José Alfredo Jiménez, the great maestro of Mexican country music known as “ranchera”, La Rumorosa takes it name from the whispering sound that the wind makes as it whips round the rocks.
Power companies have heard the whispers, and so too has Baja California’s state government. Now plans are afoot to transform La Rumorosa into a leading generator of clean energy, in keeping with the Border Energy Forum’s goal of promoting the use of renewables as a means of conserving the region’s environment.
The state government is already working on a 10-megawatt wind-farm to be known as Rumorosa 1, for which a $26 million engineering, construction and supply contract was awarded to Mexico’s Turbopower Services. The project’s five turbines are being supplied by Spain-based Gamesa.
Soon Baja California’s state government aims to invite bids for the construction and operation of a 100-megawatt plant in the same area. And more ambitious plans are afoot, involving major international players.

See also:
Special section with maps, tables and graphics - in PDF as Flipping Book
Cities Bank on Wind: state of Tamaulipas and municipalities produce their own power 

Under Mexican law, the state has a monopoly of electricity sales to consumers through its Federal Electricity Commission (CFE). But that doesn’t stop local authorities and companies from building power generation facilities to supply themselves. As in Tamaulipas (see separate story), the Baja California state government will be using the power from Rumorosa  1 to supply the municipalities of Mexicali and Tijuana, while freeing up capacity from the CFE’s 720-megawatt Cerro Prieto geothermal complex at Mexicali to which a further 100-megawatt unit is to be added as power demand grows in the region.
Nor do the rules preclude exports of power or sales to the CFE itself.
Which is where Sempra Energy and Unión Fenosa come in, as well as Mexico’s own Fuerza Eólica.
California’s Sempra is planning a wind farm of some 100-125 megawatts initially, with a view to 1,000 megawatts at a later stage. Spain’s Fenosa is also planning to reach 1,000 megawatts, but in two 500-megawatt stages. Fuerza Eólica is looking at 300 megawatts.
These projects are being planned with a view to exports of power to California, so helping the US state to meet its ambitious goals for energy use from renewable sources, using  expanded interconnections at Tijuana and Mexicali.
Some of the geothermal power freed up at the current configuration Cerro Prieto, and of the additional 100 megawatts could also be exported to California, according to sources at the CFE.
In energy terms, the Baja peninsula is an island, cut off from the rest of Mexico though connected to California. Plans are afoot to remedy that by creating an interconnection with Mexico’s CFE-run national grid, so opening a further “export” opportunity from renewables projects in the peninsula.
As Mexico suffers its deepest recession of recent years, the growth of renewable energy projects has an important human dimension that will not be lost to participants in the XVI Border Energy Forum, to be held this week in Houston. Construction of geothermal, wind-power and solar projects require considerable quantities of labor. So too does manufacture of the necessary equipment.
VienTek, a manufacturing joint venture in Ciudad Juárez, Chihuahua, is a leading maker of blades for wind-power projects in the United States and elsewhere in the world. VienTek was founded in 2002 by TPI Composites of Scottsdale, Arizona and Mitsubishi Power Systems (MPS), a Florida-based unit of Japan’s Mitsubishi Heavy Industries.
Two years ago, VienTek increased capacity at its Juárez plant from 400 to 1,200 megawatts a year in an expanded 500,000 square foot plant. The workforce grew from 550 to 900.
VienTek manufactures blades using TPI’s patented SCRIMP® process technology, a highly advanced form of vacuum infusion. VienTek also manages a 15-acre blade storage facility in Santa Teresa, New Mexico.

 

Commitment
from the Capitals

Participants in this year’s Border Energy Forum know they have strong allies in the respective federal governments. Presidents Barack Obama and Felipe Calderón are strongly committed to a clean environment.
The Renewable Energy Program recently outlined by the Mexican Energy Ministry states clearly that what is good for the environment is also good for business. “We are convinced that by using renewable sources of energy, dependence on fossil fuels can be reduced and a proportional reduction can be achieved in emissions of greenhouse gases while at the same time increasing the added value of economic activities,” the program says.
Highlighting Mexico’s considerable potential in terms of renewable energy, the program outlines policies for sustainable development that aims to free Mexico from the volatility of oil and natural gas prices by diversifying the nation’s energy portfolio.
The principle renewable energy resources identified by the document include sunshine in abundance; rivers and streams for mini-hydroelectric plants; areas where winds are intense and constant; large volumes of agricultural waste such as sugar-cane bagasse, and major quantities of organic waste in the cities and countryside that can be managed in sustainable form.
Renewable energy fulfills social needs too in a country where many people in remote villages continue to lack electricity in their homes.
Renewable energy, the document says, “can be a driving force of social development by bringing electricity to communities where conventional energy is not economically viable because of their distance from the national grid.”
On the economic front, it adds, renewable energy can encourage the creation of small and medium-sized companies, the generation of new jobs, important developments in science and technology, and the possibility of growing trade with other countries that are making progress in renewables.
Mexico has a long way to go before these lofty goals are achieved, though few would doubt its ability to achieve them considering the abundance of resources. Renewables currently account for less than 2,000 megawatts, or 3.3 percent, of the installed capacity of Mexico’s state system, not counting the 19 percent of major hydro schemes. The single nuclear plant, at Laguna Verde in the southern Gulf state of Veracruz, accounts for 2.4 percent.
The remaining 75.3 percent is generated by fossil fuels, mainly natural gas and petroleum derivatives as well as some coal. And of the 3.3 percent of renewables, geothermal sources account for more than four fifths.
The plan sets a possible conservative goal of more than doubling renewables’ share of total power generation to 7.6 percent by the time the present Mexican administration leaves office in 2012, mainly through new wind-power projects, and electricity is to be brought to 2,500 rural communities that currently lack access.
The recent Global Forum on Renewable Energy sponsored by the United National Industrial Development Organization and Mexico’s federal government in León, central Mexico, closed with a call to use renewable energy as a means of achieving social justice.
“The new world order is not simply inviting us. It’s demanding that we change our energy paradigm,” said Georgina Kessel, the Mexican Energy Secretary.
These words certainly ring true in Mexico. And natural gas, including cross-frontier transportation projects and marketing, is one of the main subjects for debate at the Border Energy Forum.
Mexico’s production of natural gas has grown to more than 7 billion cubic feet a day from just over 4.5 billion five years ago. Most of the gas is produced in association crude oil from the southern Gulf.
But output from the non-associated Burgos onshore gas basin across the border from Texas has grown to more than 1.4 billion cubic feet a day from just over 1 billion in 2004.
Much of the Burgos basin has been developed under long-term service contracts with companies such as Spain’s Repsol and Brazil’s Petrobras. But these contracts lack incentives that are common elsewhere in the world.
Because Mexico’s Constitution states that all hydrocarbons belong to the state through its Petróleos Mexicanos (Pemex) monopoly, production-sharing and risk contracts are effectively ruled out.
An energy reform enacted by the Mexican Congress last year provided for limited incentives within the Constitutional framework under new contracts of which the first drafts are expected to be presented to the Pemex board next month. In addition, President Calderón has called for a “second generation” of energy reforms, though he has yet to spell out what he specifically means by the term.
But despite the growth in production of natural gas, output of crude oil by Pemex has slumped by 800,000 barrels a day over the last five years. Meanwhile domestic consumption has grown while exports of crude have fallen to 1.2 billion barrels a day from almost 1.9 million in 2004.
Some analysts now predict that Mexico is only a few years away from ceasing to be a net exporter of crude. The point has not been lost on Agustí­n Carstens, Mexico´s finance minister. He has repeatedly emphasized that the drop in oil production and exports is the main problem facing the Mexican economy, which is expected to suffer negative growth of almost 7 percent this year.
Since the late 1970s, when Mexico began to develop the huge Cantarell complex in the Sound of Campeche, successive governments have used oil income as a substitute for taxes. Now Mexico’s tax income is one of the lowest as a percentage of gross domestic product in Latin America.
Which is why, amid the nation’s deepest economic recession since the 1930s and to howls of dismay from opposition politicians, Carstens has devised a 2010 budget that increases taxes. But, whatever his critics say – and they are many – Carstens has a good track record on oil matters.
Last year, as world oil prices soared into triple figures, Carstens hedged the bulk of Mexico’s 2009 exports at $70 a barrel. Given the sharp fall in prices since then, the operation has proved to be a masterstroke that saved the nation’s economy from collapse.
There seems little likelihood of the same rabbit being pulled out of the hat next year, but President Felipe Calderon presented Carstens with the next best thing by appointing Juan José Suárez Coppel as director-general of Pemex earlier this month.
Suárez Coppel, who replaced Jesus Reyes-Heroles after less than three years in the post, is a former chief financial officer of Pemex. Much more significant, though, is his relationship with Carstens.
Together, the two men studied at ITAM, the private university that is the alma mater of much of the Mexican business and political elite. Together they worked in the Finance ministry, mentored by Francisco Gil, Carstens’ predecesor as minister.
To say that Suárez Coppel has his hands full would be an understatement. Pemex has huge problems. They include a highly privileged union that ensures a rigid and bloated workforce, huge delays in the execution of projects, accusations of widespread theft feeding a black market in fuels, fears of rebel attacks, and – as throughout the company’s history – claims that corruption is rife.
Not to mention foot-dragging over the implementation of last year’s energy reform.
But Suárez Coppel is a numbers man, and that is presumably what he is there to sort out.
Topping the list of disturbing numbers is crude production, which has now fallen below 2.6 million barrels per day.
As he deals with that problem. Suárez Coppel is sure to focus on three upstream projects in particular. They  are Cantarell, Ku-Maloob-Zaap (KMZ) further out in the Sound, and Chicontepec, onshore the southern Gulf state of Veracruz.
On Cantarell, there is bad news and good news for the new Pemex chief. Output in August was 650,154 barrels per day, the Energy Ministry reported. That was 34 percent down on the same month of last year.
But there was an encouraging sign, too, of a possible slowing at last in Cantarell’s steep decline from its 2.2 million barrels a day peak of almost six years ago. The August output from Cantarell was marginally up on the 646,557 barrels a day of July, the first month-on-month increase in years.
The August figure gave strength to the claims by Pemex that the rate of decline of Cantarell is being progressively reduced and will stabilize by about 2012 at about 400,000-500,000 barrels a day.
KMZ has taken over from Cantarell as the nation’s leading source of crude. But at about 800,000 barrels a day, production appears to have reached something of a plateau. Pemex chiefs say they have not yet worked out when decline will set in at KMZ but most estimates say it can be only two years away.
Which leaves Chicontepec, probably the biggest problem of all. Pemex always said the project would be difficult and costly, but the return on at least $3.4 billion of investment has been meager to say the least.
The Chicontepec target is to produce 700,000 barrels a day by 2017. In January of this year, when the Energy ministry first published figures for its output, it registered a mere 29,129 barrels. In August, production was 30,706.
Pemex, of course, has many other assets, but most are in decline. At the beginning of this year, the state company told the Mexican Senate that by 2017, the oilfields now in production would lose output of 1.8 million barrels a day of production.
Well before then, Pemex will have to raise output from several new sources or Mexico will be finished as an exporter of crude. If Suárez Coppel manages that, he will be a hero. If not, the problems for Carstens will only get worse.
And, whatever the outcome, Mexico clearly has to diversify its energy resources in keeping with its goals of achieving a cleaner environment.