Spotlight: The natgas projects nearing completion in Mexico's southeast

With a US$4bn natural gas pipeline and two combined-cycle gas power plants set to start operations in mid-2025, southeastern Mexico will soon benefit from unprecedented access to clean and competitively priced energy.

That will unlock new potential for economic growth in one of the country's poorest regions.

Mexico's state-owned power utility CFE and international infrastructure companies such as Calgary-based TC Energy are leading the drive to increase gas and power supply to the Yucatán peninsula and accelerate the region's economic development.

CFE is investing US$1.2bn in building two combined-cycle gas plants in the cities of Mérida and Valladolid, with combined capacity of about 1.5GW. 

Construction of both plants began in January 2022 and was more than 90% complete by the end of September. The plants are expected to start operating in the first quarter of next year.

A consortium led by Mitsubishi Power was assigned the contract to construct both plants.

CFE says that the new power plants will allow it to meet the region's growing demand for energy, which is rising partly as a result of government projects such as the Maya Train.

According to CFE, energy demand on the peninsula was 5.7% higher in 3Q24 than in the same period of last year, by far the highest rate of growth in Mexico.

Pipelines make progress

To feed its new power plants and increase the supply of natural gas to industrial customers in the region, CFE has struck multi-billion dollar deals with international infrastructure developers.

The first of those projects, TC Energy's Southeast Gateway pipeline, is nearing completion earlier than expected and under budget. The project, which was originally costed at US$4.5bn, will now come in at between US$3.9bn and US$4.1bn. 

The mainly underwater 715km pipeline in the Gulf of Mexico will supply up to 1.3Bf³/d (billion cubic feet per day) of natural gas to CFE.

The Southeast Gateway will transport gas originating in Texas shale fields to the state of Tabasco, where it will interconnect with other natural gas pipelines for transport to the Yucatán peninsula.

Source: TC Energy

If CFE's power plants are ready, TC Energy has said it will try to start operations before the agreed target date of mid-2025. 

Meanwhile in June 2024 construction began on another important piece of the region's energy infrastructure. 

On the Yucatán peninsula, French energy company Engie and global infrastructure specialists Macquarie are building a 700km extension to the Mayakan gas pipeline. The project will double the duct's capacity. 

According to CFE, total investment in the project will be more than US$2bn. Construction is expected to be complete by the end of 2026.

CFE and its private sector developers say that the natural gas investments will deliver new opportunities for economic growth in the region.

According to TC Energy, Mexican states with natural gas infrastructure have a GDP per capita 50% higher than those without.

"Our project and the 1.3Bf³ per day of new capacity it brings is essential in helping to close the poverty gap between northern and southern Mexico," Stanley Chapman, the company's head of natural gas pipelines, told an investor day in November.