Spotlight: TC Energy's US$4.5bn Mexico offshore pipeline project

Bnamericas Published: Friday, August 05, 2022
Spotlight: TC Energy's US$4.5bn Mexico offshore pipeline project

Canadian midstream firm TC Energy is building a US$4.5bn offshore natural gas pipeline in partnership with Mexican public utility CFE.

The TGNH Southeast Gateway pipeline will have three onshore connections: it aims to feed the US$12bn Olmeca refinery in Tabasco state by linking Tuxpan in Veracruz state with Coatzacoalcos to the south and, through a branch, with the port of Dos Bocas, Tabasco state, to the east.

The Coatzacoalcos onshore connection will also allow gas to flow from Tuxpan to the planned US$435mn Jaltipán-Salina Cruz pipeline, which is planned to cross the Tehuantepec isthmus and feed CFE's Salina Cruz LNG project.

Source: TC Energy

The 715km pipeline will transport 1.3 billion cubic feet per day, according to TC Energy, with commercial operations expected to start in mid-2025. Part of the financing will come through US$2bn of new debt and credit leveraged through its partial ownership of the Sur de Texas pipeline, the company said.

As privately led projects have faced permitting and regulatory hurdles, North American companies are resorting increasingly to striking partnership deals with both CFE and state-owned oil and gas firm Pemex. In parallel, the US government has opened a USMCA arbitration process to protest perceived unfair treatment of North American energy companies by Mexican authorities.

In early July, CFE and Pemex announced a series of public-private partnerships totaling US$12.5bn in new investments and among which the TC Energy partnership was included. Other partners are ICA Fluor and New Fortress Energy.

The TC partnership also includes a new contract model for the assets owned by TC subsidiary Transportadora de Gas Natural de la Huasteca (TGNH), namely the US$600mn Tamazunchale-El Sauz pipeline (operational since 2014), the US$900mn Tula-Villa de Reyes pipeline (expected to come online in 2022) and the US$800mn Tuxpan-Tula pipeline, subject to a final investment expected for Q4.

According to the firm, TGNH's assets will be brought together under a single dollar-denominated, take-or-pay transportation service agreement valid until 2055, which will include the company's future gas transport projects.

CFE will also acquire a 15% participation in TGNH's assets conditional on an unspecified amount of investment in its projects and approval by competition watchdog Cofece and energy regulator CRE. After the contract's expiration in 2055, CFE would increase its equity stake in TGNH to 35% (owning 49% of Southeast Gateway and 15% of the firm's other assets).

Additionally, both firms agreed to drop pending international arbitrations regarding the development of Tula-Villa de Reyes and Tuxpan-Tula.

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