Mexico reaches deal with firms on gas pipeline contracts
Representatives of Grupo Carso, IEnova, and TransCanada attended the news conference – Photo: Taken from Manuel Bartlett’s Twitter account

Mexico reaches deal with firms on gas pipeline contracts

27/08/2019
12:52
Newsroom & Agencies
Mexico City
Dave Graham, Paul Simao/REUTERS & Misael Zavala & Alberto Morales/EL UNIVERSAL
-A +A
The deal renegotiates the terms of natural gas pipeline contracts that are expected to save the Mexican government USD $4.5 billion

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On Tuesday, Mexico said it had struck a deal with a group of companies to renegotiate the terms of natural gas pipeline contracts signed under the previous administration that will eventually save the government USD $4.5 billion.

The deal announced by President Andrés Manuel López Obrador and the head of the Federal Electricity Commission (CFE) at a news conference will reduce what Mexico pays the firms to transport natural gas, the government said.

The dispute has caused diplomatic frictions with Canada in particular, aggravating concerns that López Obrador, a veteran leftist who took office in December, could call into question any contracts signed before he assumed the presidency.

Flanked by Mexican industry leaders, including billionaire Carlos Slim, the country’s richest man, Mexico’s president hailed the deal as a win for the public which would give certainty to investors and encourage growth.

“We won because the rates of gas transportation are being reduced,” López Obrador said. “We also won because we avoided a dispute.

"With this deal, gas supply is guaranteed for the electric industry so that we do not have blackouts in many years, and for the promotion of the national industry. We will have enough gas in Mexico,” López Obrador said.

The government is still negotiating with one of the parties involved, Fermaca, a Mexican infrastructure company contracted to build two of the seven pipelines under dispute.

López Obrador said the deal would bring savings to public coffers of USD $4.5 billion over time. A statement by the CFE later said that sum was the target, and that USD $3.74 billion had been saved under the results of negotiations to date.

The biggest pipeline under dispute was a USD $2.5 billion project between Texas and the Mexican Gulf Coast port of Tuxpan. Completed in June, it was built by Canada’s TC Energy Corp and IEnova, a Mexican unit of U.S. company Sempra Energy.

Another was in the hands of Grupo Carso, an infrastructure firm controlled by Slim, who rarely makes public appearances.

Speaking at the news conference, Slim said he was pleased a deal had been reached. His presence there was a testament to the importance of the discussions.

The CFE pushed the renegotiation of the contracts signed under the last government, arguing the terms were unfair.

López Obrador, in his remarks on Tuesday, said the contracts were “harmful", though Slim and Carlos Salazar, the president of Mexican business lobby CCE, pushed back against questions from journalists suggesting the renegotiation was a rebuke of the private sector.

CFE head Manuel Bartlett said the USD $4.5 billion savings foreseen in the renegotiation should be viewed against a cost to the utility of USD $12 billion under the original contracts.

Miguel Reyes, a senior CFE official, said the extent of savings realized varied from one pipeline contract to another.

Seen across 25 years, the renegotiation meant a reduction of 28% on average in the transportation rates paid by the utility for all the pipelines included under the accord, Reyes said.

For his part, CCE’s Salazar said the numbers were “complex”, and that the total projected costs of services to the CFE over the lifetime of the contracts were some USD $21 billion.

The news conference was attended by Carlos Ruiz Sacristán, executive president of IEnova; Tania Ortiz Mena, CEO of IEnova; Roberto Jones, director of TransCanada; Carlos Borunda Zaragoza, director of Government Affairs of TransCanada; Carlos Salazar Lomelín, president of the Business Coordinating Council (CCE); Carlos Slim Helú, president of Grupo Carso; Gerardo Kuri Kaufmann, counselor of Grupo Carso.

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