Mexico reaches accord with pipeline companies that will save US $4.5 billion

The federal government has reached an accord with three pipeline companies that will save US $4.5 billion, President López Obrador told reporters on Tuesday.

The companies are Carso, IEnova and TC Energy (formerly TransCanada Corporation), all of which built gas pipelines for the Federal Electricity Commission (CFE).

“I want to point out or emphasize that this was possible because of the will, the willingness of the businesspeople to [engage in] dialogue,” López Obrador said.

“The contracts had already been legally signed, the conditions, which we consider harmful to public finances, had already been agreed. That’s why we went to the owners of the companies so that, putting the legal commitments to one side, an agreement was reached that benefits everyone,” he added.

The deal reduces the amount that Mexico will pay the three firms to transport natural gas.

News of the agreement comes almost two months after the CFE announced that it had filed requests for arbitration in courts in the United Kingdom and France to annul clauses in seven gas pipeline contracts.

The CFE said the claims aimed to void certain clauses in contracts with Carso, IEnova, TC Energy and Fermaca. The president said that negotiations with Fermaca are ongoing.

López Obrador highlighted the willingness of Carso chairman Carlos Slim to engage with the government, pointing out that he “was the first to reach an agreement with the [electricity] commission.”

Slim, who addressed reporters at Tuesday’s presidential press conference, agreed with López Obrador that the new accord benefits all parties.

He said the government will pay fixed fees to the companies rather than ones that increase over time as stipulated in previous contracts, explaining that will ultimately reduce the financial burden incurred by the CFE.

In turn, steady, fixed revenue will enable Carso to finance more projects and increase investment in Mexico, Slim said.

The businessman said that importing gas from Texas, which he described as the cheapest in the world, will allow Mexico to phase out the use of diesel and fuel oil. Those fuels are not only more expensive than natural gas from Texas but also contaminate more, Slim said.

He also said the new pipelines will help stimulate development in the southeast of the country because it will be possible to transport greater quantities of natural gas to that region.

CFE director Manuel Bartlett said the new agreement will allow the sale of 8.2 billion cubic feet of natural gas per day.

The Texas-Tuxpan gas pipeline – built by TC Energy and IEnova – will be the first to go into operation as a result of the pact, he said.

The dispute over the contract for that pipeline caused diplomatic friction with Canada, whose ambassador to Mexico expressed concern in June about the government’s initiation of an international arbitration process.

“I’m deeply concerned about the recent actions of the CFE and the message they send that . . . Mexico doesn’t want to respect gas pipeline contracts,” Pierre Alarie wrote on Twitter on June 26.

Source: El Financiero (sp)