James Delano
Director General
ATCO
/
Insight

Challenges Quickly Apparent to Canadian Group

Wed, 02/22/2017 - 13:33

When ATCO entered Mexico in 2014, the Canadian conglomerate expected its broad energy experience at home to play well here. It quickly learned that a nation in the middle of reinventing its energy industry from the bottom up poses unique challenges, especially when dealing with the complexities of cultural and regional differences. “You cannot enter a country, state or even location and expect everything to be the same. People are different, have different ways of doing things. We knew it was a different language, a different culture and a new experience for the company,” says ATCO Director General James Délano. He believes the difficulties are worth the effort to keep developing the company’s expertise in natural gas, infrastructure and power generation plants.

Délano adds that despite its goal to expand and develop the Alberta-based company’s three areas of expertise in the Mexican energy industry, which also include power generation and modular construction, its current focus is on natural gas pipeline construction. “We came to Mexico with the expectation of helping to build the infrastructure for the natural gas system. Our Ramal Tula project is rather small but highly important and iconic,” he says, referring to the US$50 million 16km pipeline awarded by CFE to carry natural gas from near the town of Tula, Hidalgo to the Francisco Pérez Ríos power plant. But what the company initially thought would be a walk in the park due to their expertise in the Canadian energy industry and the development of a similar project there, quickly proved to be a more challenging experience. Besides the cultural differences, entering a newly born industry quickly presented hurdles for the company, founded in 1947. The number of new institutions, processes and regulations, most of which are still under consideration, slowed the development of ATCO’s projects, forcing the company to take it step by step. “Several times we were the first to inaugurate new processes while everybody was learning to play a new game," he said.

Another main area of concern for the company became evident during the development process. ATCO found social management and land rights to be highly challenging due to the presence of Mexican local ejidatarios, dwellers on state-owned land. “We thought we could do this in a simple manner as we have in Canada where we dealt and negotiated with people,” he says.

But the Mexican scenario was very different. Even though ATCO paid handsomely for land according to a property evaluation, local people were not happy. Of the 108 ejidos it has had to negotiate with, ATCO has failed to reach consensus with two and also with six publicly owned access roads. “Even though we have made a generous proposal for a 25-year lease and have offered to build infrastructure to benefit the community, the local leaders have not yielded.”

Starting in July 2016 local leaders filed four injunctions that have caused the suspension of the company’s activities in the construction of the Tula pipeline. “We have not been able to get a hearing with the appropriate authorities to resolve the situation since the injunction procedure keeps extending,” Délano says. “Even though the initial negotiations with the representative of the ejidatarios were successful and an agreement of dismissal of the injunctions was signed and notarized, it ended up falling apart.” Although the lands in dispute are not valuable for farming the community representatives are still unwilling to settle, he adds. But ATCO has refused to give up. The successful construction of the pipeline is in the country’s best interest, Délano adds. “We are going to solve it, because the alternative is not acceptable for anybody.”

The positive attitude of the company is also reflected in their expansion plans for the Mexican energy industry. “We have expertise in transmission lines that we can bring to the Mexican market. We also have 15 diverse energy plants around the world and generate electricity efficiently.” Both areas would benefit the Mexican industry and help to consolidate the Energy Reform. In terms of pipelines the company is confident it will continue its work on the pipeline project with support from CFE, the Hidalgo state government and the Ministries of Energy and of the Interior.”