TC Energy Corp. and Mexico’s state-owned Comisión Federal de Electricidad (CFE) have agreed to a strategic alliance centered on accelerating development of natural gas infrastructure in central and southeast Mexico, including construction of the 1.3 bcfd Southeast Gateway pipeline. TC Energy and the CFE have agreed to consolidate previous transportation service agreements (TSA) executed between TC Energy’s Mexico-based subsidiary, Transportadora de Gas Natural de la Huasteca (TGNH), and CFE in connection with shared natural gas pipelines in central Mexico under a single, US dollar-denominated take-or-pay contract extending through 2055. This new TSA will also govern related new infrastructure projects to be developed.
TC Energy and CFE in conjunction with the alliance also took final investment decision (FID) on the 715-km Southeast Gateway. The pipeline will serve southeast Mexico, starting onshore in Tuxpan, Veracruz, then proceeding offshore, making landfall at Coatzacoalcos, Veracruz, and Dos Bocas, Tabasco. The project is expected to be in-service by mid-2025 at an estimated cost of $4.5 billion
TC Energy and the CFE also agreed to mutually terminate presently suspended international arbitration (OGJ Online, Nov. 8, 2021) between the two related to the 886-MMcfd Tula-Villa de Reyes and Tuxpan-Tula (TXTL) pipelines, with TC Energy earning a return on and of all previous capital invested. TC Energy and CFE have also agreed to work together to complete TXTL’s central segment, subject to fourth-quarter 2022 FID.
Subject to regulatory approvals from Mexico’s economic competition commission and its Regulatory Energy Commission, CFE will have the opportunity to hold a 15% equity interest in TGNH. Regulatory approvals related to CFE’s equity participation are expected to take up to 24 months.
At the end of Southeast Gateway’s contract life in 2055 and after TC Energy has recovered full return on and of capital, CFE’s equity interest would increase to 35%, reflecting the equivalent of 49% of net value of Southeast Gateway and 15% of the other TGNH pipelines.