Mexico’s President Says He’s Renegotiated Pipeline Contracts with Canadian and U.S. Companies

• Mexico’s president says his government has reached a deal with private natural gas pipeline operators to solve a dispute over fees and payments.
• The pipelines would allow Mexico to import U.S. natural gas and distribute gas throughout Mexico.
• President Andres Manuel Lopez Obrador said that companies from the U.S., Canada, and Mexico had agreed to restructure fees. He said the companies accepted about a 30% lower profit margin.
• The president said the deal would save Mexico — especially the national electricity utility — as much as $4.5 billion over the next three decades.

President Obrador said the private companies, one of which is believed to be Calgary-based TC Energy Corp., had taken advantage of the country when the contracts were signed under previous administrations.

In its recent second-quarter financial report, TC Energy said its Mexican state power utility customer had filed in June for arbitration on contracts for three of its natural gas pipelines, seeking nullification of clauses related to force majeure — unforeseeable circumstances that would prevent a contract from being fulfilled — and reimbursement of fixed capacity payments.

“In our view, the contracts were properly established in accordance with all original bid and regulatory requirements and remain valid and enforceable,” TC reported. “We will defend them as necessary through the arbitration proceedings.”

The company said it had completed construction and commissioning for its Sur de Texas gas import pipeline but had not yet been allowed by the regulator or customer to begin service. Meanwhile, construction was continuing despite delays on its Villa de Reyes project to be completed later this year and its Tula project, where the targeted completion date has been pushed back to the end of 2021.

To keep up on pipeline-related news, check the Submar blog regularly.