Mitsui eyes Mexico

July 8, 2014

April 2013 MoU overseen by President Pena NietoJapan's Mitsui Corp. Ltd. is looking toward increasing its investments in Mexico, after the Mexican Congress voted in December to open the oil and gas industry to foreign companies.

The Wall St. Journal reported last month that Yasuhiro Uchida, a general manager of oil and gas development at Mitsui & Co.'s Energy Business Unit I, said his company is looking at shale reserves spanning the Texas border with Mexico and deepwater reserves in Mexican waters. Uchida said Mitsui would be open to alliances with any good partners, including Pemex, in bidding on new blocks.

Its local subsidiary, Mitsui de México, S. de R.L. de C.V., is headquartered in Mexico City and already has investments in Mexican petrochemicals, agrochemicals, iron, steel, and other business segments.

In explaining its interest, Mitsui Corp. says Mexico has "important geopolitical advantages, including not only proximity to the markets of North America and Latin America, but also excellent access to Asia via the Pacific and Europe and Africa across the Atlantic."

Mitsui has identified Mexico as a priority market in its medium-term management plan.

Pipelines

In April 2013, Pemex and Mitsui signed a memorandum of understanding to collaborate in the energy business. The first project is to build a pipeline to connect the main US gas pipeline system to Mexico.  The plan is to enable Mexico to eventually import 770 MMcf/d of LPG. Mexican President Enrique Peña Nieto was present at the signing [photo at right from presidencia.gob.mx] and said the pipeline could cost $460million.

The new 36in.-diameter pipeline will extend about 100km (60mi.) south from Tucson to Sasabe in Arizona, to join a new interconnection point at the US-Mexico border [map of Sierrita pipeline route at right]. Mitsui says the design capacity is approximately 200 MMcf/d, and the estimated project cost is about $200 million.

Pemex general director Emilio Lozoya Austin said Mitsui and Pemex were also considering another gas pipeline at a cost of $800 million.

Masami Lijima, CEO and President of Mitsui, said “Mexico means a great deal, because it is one of the eight selected countries in the world for our group.”

In July 2013, Mitsui signed an agreement to take a 30% ownership stake in the project company, Sierrita Gas Pipeline LLC, through Mitsui's 100% owned US company MIT Pipeline Investment Americas, Inc. Pemex has a 35% ownership stake in Sierrita through its wholly owned affiliate, MGI Enterprises US LLC. Kinder Morgan Energy Partners LP has the remaining 35%.

In March 2014, the US Federal Energy Regulatory Commission (FERC) issued the Final Environmental Impact Statement, and in June 2014, FERC issued the Certificate of Public Convenience and Necessity and the Presidential Permit, allowing pipeline construction to begin. Mitsui expects it to be operating by 30 September 2014.

History

The former Mitsui & Co. first opened a representative office in Mexico in 1910, during the Mexican Revolution, and so the company recently recognized its 100th anniversary. Mitsui & Co. began by importing fertilizers into Mexico and exporting raw cotton and foodstuffs to Japan. It now invests in large-scale infrastructure projects, including gas, electric power, and water treatment, and also focuses on the motor vehicle industry.

In 2008, Mitsui bid and won a 37.5% stake, together with Korea Gas Corp. and Samsung Corp., in a project to build a new LNG receiving terminal in Manzanillo City, Mexico. The partners built and will operate the LNG storage and re-gasification facility, and will supply gas to CFE for 20 years, primarily to thermal power plants in west-central Mexico.  Commercial operation began in June 2012.

Mitsui recently bought into Mexico's gas distribution sector. In September 2012, it concluded a share purchase agreement through MIT Gas México, S. de R.L. de C.V. (MGM), which was established by Mitsui in August 2012, and Spain's Iberdrola subsidiary, Iberdrola Energia, S.A.U., to acquire shares in Gas Natural Mexico, S.A. de C.V. (GNM). Mitsui acquired a 13.25% share share in GNM for US$82million, and an additional 1.75% for US$10.8million, for a total 15% interest. The remaining 85% is held by Gasinmex, S.A. de C.V.

GNM was established in July 1990 and is Mexico's leading gas distribution company, providing residential, commercial and industrial gas distribution services through a 17,000km distribution network. Mitsui says it will "pursue further expansion of its activities in gas-related infrastructure businesses in Mexico."



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