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Mexico Scraps Plans to Build 10 Nuclear Power Plants in Favor of Using Gas

Mexico, one of three Latin American nations that uses nuclear power, is abandoning plans to build as many as 10 new reactors and will focus on natural gas-fired electricity plants after boosting discoveries of the fuel.

The country, which found evidence of trillions of cubic feet of gas in the past year, is “changing all its decisions, amid the very abundant existence of natural-gas deposits,” Energy Minister Jordy Herrera said in a Nov. 1 interview. Mexico will seek private investment of about $10 billion during five years to expand its natural gas pipeline network, he said.

Mexico, Latin America’s second-largest economy, is boosting estimated gas reserves after Petroleos Mexicanos discovered new deposits in deep waters of the Gulf of Mexico and shale gas in the border state of Coahuila. The country was considering nuclear power as part of plans to boost capacity by almost three-quarters to 86 gigawatts within 15 years, from about 50 gigawatts, and now prefers gas for cost reasons, he said.

“This is a very good decision by the Mexican government,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas. With a power generation project based on gas “you can build multiple plants at a much lower cost and much faster pace than a nuclear facility.”

Nations around the world are also reconsidering plans for increasing their reliance on nuclear power after the March 11 earthquake in Japan that wrecked the Fukushima Dai-Ichi plant, causing a loss of cooling, the meltdown of three reactors and the worst atomic disaster since the leak at Chernobyl in 1986.

Strategic Plans

Mexico’s energy ministry plans to update the nation’s long- term strategic plan to reflect the increased importance of gas, Herrera said, with the report due in the first quarter of 2012.

“Until we find a model to make renewable energy more profitable, gas is more convenient,” Herrera, who was appointed energy minister on Sept. 9, said from Mexico City.

Pemex, as the state-owned oil producer is known, estimates there may be as much as 300 trillion cubic feet of gas in the Coahuila region, the head of exploration and production, Carlos Morales, said in an Oct. 27 presentation.

State-owned Comision Federal de Electricidad, Latin America’s largest utility by revenue, plans to invest 66.3 billion pesos ($4.9 billion) in 2011 and 90.4 billion pesos in 2012, mainly in plant generation, as it seeks to keep pace with electricity demand, according to the company’s website.

Nuclear Plants

Mexico considered a plan to build as many as 10 nuclear power plants by 2028, according to a CFE presentation. The state company was weighing four investment plans to increase long-term capacity, the most ambitious nuclear plan included building 10 nuclear plants, according to the May 12, 2010 presentation.

The power company, also known as CFE, is investing in the construction of six new plants using fossil fuels to improve capacity and efficiency and is reconfiguring other facilities to replace the use of other fuels with natural gas.

Herrera’s comments are a departure from former Energy Minister Georgina Kessel, who said nuclear energy would help achieve President Felipe Calderon’s pledge to generate at least 35 percent of the country’s energy from so-called clean sources.

“I’m convinced that in the medium- and long-term, increasing nuclear capacity is the path that should be followed,” Kessel said in an interview last year.

“The country has very high potential to develop renewable energy,” Herrera said. “But the renewable energy world is hurt by the cheap gas prices. And the government has to consider how much it can spend to promote alternative energy sources.”

Shale Gas Production

U.S. shale gas production increased by an average of 48 percent a year from 2006 to 2010, according to the Energy Department in Washington. Output will rise almost threefold from 2009 to 2035, the department predicted in its Annual Energy Outlook release on April 26.

Gas futures, which traded as high as $13.69 per million British thermal units in July 2008, dropped to as low as $3.48 last month. While gas produces roughly half the carbon dioxide per megawatt-hour of coal, nuclear reactors don’t release carbon dioxide into the air. activity.”

Natural gas for December delivery rose 4 cents, or 1.1 percent, to $3.790 per million British thermal units at 10:23 a.m. on the New York Mercantile Exchange.

To contact the reporter on this story: Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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