CFE and TC Energy Join Forces to Build US$5 billion Pipeline
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CFE and TC Energy Join Forces to Build US$5 billion Pipeline

Photo by:   Roman Pentin
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By Kristelle Gutiérrez | Junior Journalist & Industry Analyst - Wed, 07/06/2022 - 10:26

Mexican NOC PEMEX and state electric utility company CFE reported the development of four key infrastructure projects, requiring an investment of US$12.5 billion. The largest project is to be developed by CFE and the Canada-based TC Energy, which have signed off on a US$5 billion alliance to build a 420km extension to an underwater pipeline going from Tuxpan, Veracruz state. The natural gas pipeline will feed a planned liquefaction facility located at the port of Salina Cruz, Oaxaca.

During the inauguration of the Dos Bocas-based Olmeca refinery, Manuel Bartlett, Director, CFE, announced the joint venture, which he said will “procure the natural gas supply in the central and southeastern regions of the country.” CFE's representative added that the state utility will stop being “a transporting services consumer” and become a partner and co-owner of the pipeline. In fact, Bartlett emphasized that CFE’s starting participating interest will be 15 percent but will steadily increase from 2026 onward until it reaches a final 49 percent. He also added that the pipeline’s construction created more than 900 direct and 450 indirect jobs.

The pipeline project was conceived as an alternative to the Tuxpan-Tula pipeline, whose construction was cut short due to opposition from at least five Indigenous communities in the states of Veracruz, Puebla and Hidalgo. After public consultations with members of these communities, the redesigned pipeline allowed CFE and TC Energy to carry on with the planning stages of the Tuxpan-Coatzacoalcos without infringing on the land rights of the communities. The companies also enabled a branch extension to supply Dos Bocas.

Bartlett commented that the expansion will allow for new infrastructure to transport more natural gas to Mexico’s southeast and the Yucatan Peninsula. It will also allow for the unification of gas transportation contracts in the central region of the country, from Tamazunchale to Tuxpan, turning them to a single price with a flat-rate contract. According to Bartlett, this should further help stabilize electricity generation costs for at least the next 25 years and prevent them to go beyond the inflation rate.

The new partnership also heralds renewed efforts from both parties to resolve the pending arbitration cases of the Tula-Villa de Reyes and Tuxpan-Tula pipelines. In the case of Tuxpan-Tula, CFE and TC Energy opted to have the possibility for arbitration removed from the contract.

The second project involving CFE is a partnership with New Fortress Energy to build a US$2.2 billion liquefaction plant in Baja California Sur. Additionally, PEMEX will once again look to develop the deepwater Lakach field in Veracruz alongside New Fortress. Furthermore, the NOC is looking to develop a new coker unit at the refinery in Salina Cruz, Oaxaca, which would cost US$3.8 billion and is to be developed with ICA Fluor.

Photo by:   Roman Pentin

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