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Mexico, Midstream Firms Reach Deal In Gas Pipelines Dispute

Pipeline

Mexico and several energy infrastructure companies have reached an agreement to resolve a dispute over contracts for natural gas pipelines that the previous Mexican administration had signed, Reuters reported on Tuesday, citing three people with knowledge of the matter.

In June, Mexico’s President Andrés Manuel López Obrador—who has criticized his predecessor’s energy reforms—said that the natural gas pipeline contracts that the previous administration had signed were ‘abusive’ and ‘unfair’ to the Mexican state, raising additional concerns as to whether the new administration would respect previously signed energy deals.

In June, Mexico’s state utility CFE sought arbitration in a dispute over a natural gas pipeline that TC Energy, formerly TransCanada, and Mexican company IEnova, a unit of U.S. Sempra Energy, are building from Texas to Tuxpan on the Mexican Gulf coast.

The companies announced earlier in June that the pipeline they are building had achieved mechanical completion, but the state utility CFE also has to issue verification that the pipeline has been completed.

In the request for arbitration, CFE seeks “fairer” terms for a number of pipeline projects signed by the previous Mexican administration.

The Mexican government has reached a preliminary deal with four private infrastructure firms in the pipeline dispute, The Wall Street Journal reported on Sunday, citing people with direct knowledge of the negotiations.   

As per the terms of the preliminary agreement, Mexico will pay higher fees for natural gas transportation on the pipelines over the next ten years, but it will ultimately achieve nominal savings of around US$600 million, the Journal cited an analysis as saying.

If the agreement is approved, the Texas-Tuxpan pipeline could start operations, the Journal notes.

Last week, López Obrador signaled that the Mexican government had made progress in the negotiations with the private companies, and said that he expected a deal to be reached as soon as this week.

By Tsvetana Paraskova for Oilprice.com

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