News, Insights and Best Practices for Manufacturing in Mexico

Natural Gas Distribution in the Saltillo Manufacturing Industry

   
30 May 2017

Category: Automotive Manufacturing, Manufacturing in Mexico

Exports of U.S. natural gas to Mexico have quickly risen in the past decade because of its low prices and ease of access. Since 2009, Natural Gas exports to Mexico have doubled in support of the high demand from industrial and electric power sector consumption. The Saltillo region maintains various manufacturing locations and was the fourth largest consumer of natural gas in Mexico in 2016. Saltillo, Coahuila, contributes to the high demand of natural gas in the region because of its automotive manufacturing cluster. As the Saltillo manufacturing industry grows, the commercial and industrial consumption of natural gas also reaches new heights.

The recent manufacturing boom has raised the bar to incorporate the use of natural gas in production operations. Natural gas is a raw material used to create plastics, antifreeze, and a wide range of chemicals - all of which support the production process. It is also used as a heat source to make glass, steel, cement, and bricks among others. To satisfy the demand for space cooling and heating in the fluctuating Mexican temperatures, natural gas consumption for electric power is forecast to rise most. A bump in electric power consumption not only for industry spaces but also in homes with increasing access to controlled temperature is the main contributor to the rise in natural gas exports from the U.S. to Mexico. Overall, natural gas usage in the Mexican industrial sector enables efficient production value.

Natural Gas Distribution in Saltillo

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Depending on the type of equipment used in the manufacturing process, the average monthly consumption cost of natural gas in Saltillo can vary. Leonard Ottosen, Client Development Manager of the Offshore Group ZAPA in Saltillo, stated how natural gas prices for manufacturers are charged monthly for distribution and consumption, and show up in two sections on the monthly bill. The distributed natural gas in the Saltillo Region is based on overall cubic meter at a fixed rate between 3 sizes of industrial consumption. According to Ottosen, "the more you use, the less you pay per unit."

The three different sizes of industrial consumption is charged for each gas substation. The small commercial industry market charge is for companies using less than 41,868 GJoules a year. The large industry market charge is for companies using more than 41,868 GJoules; and the largest industry market charge is for the use of 4,186,800 GJoules to 20,934,000 GJoules per year.

Specifically, there are 5 different types of distribution blocks within each industrial consumption size that categorizes the amount of gas consumed per unit. The example below shows the units of gas used in blocks for a small commercial industry market plant:

Small Commercial Plant Blocks in Saltillo

Blocks Natural Gas Usage in GJ
Block I less than 351 GJ (84 GCal) /month
Block II between 355 GJ (85 GCal) and 2,853 GJ (688 GCal) /month
Block III between 2,882 GJ (689 GCal) and 5,414 GJ (1294 GCal) /month
Block IV between  5,418 GJ (1295 GCal) and 8,757 GJ (2093 GCal) /month
Block V more than 8,761 GJ (2094 GCal) /month

The unit of measurement is based on standard rates from the area's contractor or energy company. In Saltillo the main natural gas provider is Gas Natural Fenosa, and uses GCalories and GJoules - 1 GCalorie = 4.81 GJoules. Whereas in other places, natural gas is dispersed in BTUs.

In the Saltillo region, each block is charged for three types of service, along with a flat monthly service charge: one for commercial distribution, one for capacity, and one for use. These charges are set by Fenosa and calculated by Pesos/GJ. For example, Block I of a small commercial industry consumption, commercial distribution is $3.24 USD/GJ, Capacity is $2.51 USD/GJ, and use is $.72 USD/GJ; the flat monthly fee is $61.62 USD.

Energy Reform in Mexico

The energy reform of 2013 positioned Mexico to open its energy sector to the global market. Providing opportunities for private companies to enter into the energy market can initiate a higher production and distribution of domestic natural gas in Mexico, but U.S. natural gas imports are set to double in the next couple of years. Mexico is one of the biggest importer of U.S. natural gas with an estimated 5% use of U.S. daily production. These numbers come at a time when Mexico's own production of natural gas has fallen.

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Manufacturing in Mexico is contributing to the rise in natural gas consumption all over the country, but industry specific locations are the main source for the rise in natural gas imports and overall usage. As an automotive manufacturing cluster housing OEMs and Tier 1 and 2 suppliers, Saltillo Coahuila will contribute to the growing natural gas industry.

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