Robert Jones
TransCanada in Mexico
View from the Top

Surveying Opportunities in Power Generation

Wed, 02/24/2016 - 12:34

Q: What were the drivers that inspired TransCanada to venture into Mexico in 1997?

A: The entry of the private sector in the 1990s helped support the economic growth of the country and the development of the industry. These conditions provided opportunities that TransCanada seized, which led to the construction of the first privately owned pipelines in Mexico: Energia Mayakan in Yucatan and El Bajio in the country’s central region. In the 2000s, TransCanada built the Manzanillo-Guadalajara pipeline and subsequently the Naranjos-Tamazunchale and the Tamazunchale extension. Currently, we are building the El Encino-Topolobampo and El Oro-Mazatlan pipelines in the northwest of the country, thus consolidating our presence. The two pipelines we currently have under construction will increase our capacity by 30%, which will increase Mexico’s participation in the overall revenue for the company. More importantly, we will continue to assess new opportunities as they arise.

Q: Which main challenges did you have to overcome while constructing your first three pipelines in Mexico?

A: Mexico’s geography, and even sometimes its weather, can be challenging for projects such as ours. In many cases we have had to rely on the experience of developing projects in other countries, and in other instances we have had to innovate. For instance, in our Tamazunchale Extension project, we have used micro-tunneling techniques in order to overcome the geological challenges of the site. In El Encino-Topolobampo, we have used air cranes for transporting pipe sections to remote areas. Some of these solutions have begun to be implemented in projects in other parts of the parts.

Q: How has your relationship with the Mexican utility company and the authorities evolved now that CFE and CENAGAS have defined roles in the midstream segment?

A: Now that CFE and CENAGAS have defined roles in the midstream segment, companies involved in the sector will have more clarity and transparency. This ultimately cascades down to the bidding processes and operations. It has been a competitive and transparent process, which will ultimately lower the cost of energy to Mexican citizens. If Mexico decides to increase domestic production or continue to import gas from the US, it will be a decision highly driven by costs, technology, infrastructure, and certain other factors. However, the remaining variables are the need for transportation of this fuel and the accompanying expansion of the current gas pipeline network. The other constant is the trend of increasing the use of natural gas as a cleaner, more efficient and economic source of fuel for power generation. This will require the expansion of infrastructure in order to promote access to the power generation sites.

Q: How will TransCanada ensure a smooth transition from a pipeline constructor and operator to an electricity generator?

A: TransCanada has a long-standing tradition of innovation and a strong track record not only in the construction and operation of pipelines, but also in gas storage and power generation. Currently, we own and operate 19 energy plants in the US and Canada, providing electricity to around 11 million homes in those countries. More than transitioning from one business to another, we aim to build on our expertise in order to contribute to the energy infrastructure of the country. At the same time, we will continue operating our projects and assessing future opportunities in our pipeline. We will be evaluating the prospects that are generated by the Energy Reform and even those in the power generation sector.

Q: Which regions of the country stand to benefit from your future developments?

A: One of TransCanada’s competitive advantages is the positive impact it has on the communities where it develops its projects. An example is our El Encino-Topolobampo project that is currently under construction. This project has so far created around 3,000 direct and indirect jobs, which ultimately contributes to local and state economies. We have also provided support and assistance to indigenous communities who now have access to better schools, electricity, and water. There are also benefits such as providing industries and power plants with access to natural gas, providing them an efficient, cheaper, and more environmentally friendly source of energy. Our projects consolidate our presence in these communities for decades, and we aim to have a positive impact through our work.