Construction of the Guadalajara Pipeline earlier this decade. The pipeline connects to a liquefied natural gas (LNG) terminal in Manzanillo in the state of Colima on Mexico’s Pacific coast.
‘TransCanada is emerging… as one of the biggest beneficiaries of the country’s energy reforms’
(August 2, 2016 update to this article originally published July 27: yet another Mexico project announced – TransCanada, Sierra Oil & Gas and Grupo TMM today announced they are proposing to jointly develop storage and transportation infrastructure to serve the growing demand for refined products such as gasoline, diesel and jet fuel in the central region of Mexico and surrounding markets. The proposed US$800 million project would be the largest single investment in refined products since the establishment of the Mexico energy reform. See the news release.)
There’s no questioning the rapid pace and relentless commitment of Mexican President Enrique Peña Nieto to his country’s historic energy reforms, despite recent turbulence in the industry.
“The world is trusting and investing in Mexico,” President Peña Nieto said earlier this year during an industry conference.
“Now is not the time to stop. It is the time to move forward.
“…Just like I committed myself to achieve energy reform(s)… now I am committed to accomplish its full, effective and timely implementation.”
Experts say that commitment will translate into a 75 per cent increase in demand for natural gas over the next 15 years, as Mexico’s economy continues its relentless growth and the country continues its switch to natural gas-fired power generation.
Mexico is converting fuel oil and coal-driven power to natural gas through conversion of power plants, aimed at providing more affordable and environmentally-friendly electricity to its residents while keeping up with the pace of industry growth.
That’s where TransCanada comes in.
FIVE REASONS
why TransCanada is a leading partner in bringing Mexico’s energy reforms to life:
#1: Competitive Advantage
The company is already based in Mexico with existing infrastructure, including a head office and gas control in Mexico City, and an operations centre in Toluca, as well as an employee base comprised primarily of Mexican nationals, some of whom hold key leadership positions.
See reason #2
‘Mexico will likely remain a key source of growth for TransCanada for the foreseeable future’
The company is feeling the positive impact of Mexico’s proactive energy infrastructure expansion, with TransCanada’s investment in the country doubling virtually overnight to over US$5 billion.
Says Sarfaraz A. Khan, an analyst with Seeking Alpha, “TransCanada is emerging as the favourite foreign pipeline operator of the Mexican government and one of the biggest beneficiaries of the company’s energy reforms.”
“…Mexico will likely remain a key source of growth for TransCanada for the foreseeable future,” he adds.
Three new pipelines awarded to TransCanada
With a lengthy 20-year history in Mexico, TransCanada has earned the right recently to build three new pipelines.
#2: Trust
TransCanada’s presence in Mexico dates back to the mid-1990’s, when TransCanada constructed two of the first privately owned pipelines. The company is very well known and respected amongst government officials.
See reason #3
Most recently, the company’s joint venture with IEnova, Infraestructura Marina del Golfo (IMG) was awarded the project to build, own and operate the US$2.1 billion Sur de Texas – Tuxpan natural gas pipeline.
Within the past year, TransCanada was also awarded the Tuxpan – Tula and the Tula – Villa de Reyes natural gas pipelines.
Construction for these two pipelines is in progress with the expectation of achieving in-service dates in 2018.
Meanwhile, the Topolobampo and Mazatlán pipelines are both expected to be in-service in 2016.
Including TransCanada’s Tamazunchale and Guadalajara pipelines, that makes seven pipelines either under construction or in operation, all underpinned by 25-year contracts backed by the Mexican government’s Comisión de Federal Electricidad (CFE).
#3: Timing
TransCanada’s expansion in Mexico has coincided with a call for private investment by the government, and a plan to dramatically increase natural gas pipeline infrastructure to generate cheaper and expansive electricity.
See reason #4
Projects outlook remains positive
TransCanada’s Mexico success and recent expansion comes as little surprise to country General Manager and President of Mexico operations, Robert Jones, who sees no end in sight for the short and long-term project opportunities.
“Every year it seems we have another pipeline to build, or one that is going into commission,” Jones says. “We run a first class business, our excellent safety record and operating performance is leading us to new opportunities.”
“It’s an exciting place for TransCanada to be right now.”
Additionally, TransCanada’s efforts in working with some of Mexico’s Indigenous communities are well documented, as well as the company coming to the country’s aid during tough times such as providing aid during Hurricane Ingrid and Tropical Storm Manuel.
Our people on the ground have become well known in the community.
#4: Expertise
TransCanada operates 91,000 kilometres of natural gas pipelines across North America. That’s enough to circle the globe twice.
See reason #5
“Similar to Canada and the U.S., wherever our pipelines are, we have technicians and operators living in these communities and caring about their neighbours and fellow residents.“
And that bodes well for those who may be considering investing in the company.
“TransCanada is refinancing our Mexican business to raise funds after agreeing to a historic purchase of the Columbia Pipeline Group,” Jones explains.
“We plan to sell as much as 49 per cent of our Mexico natural gas pipeline business to financial investors as part of that $10.2 billion purchase.”
Jones believes that TransCanada Mexico is an excellent investment opportunity. “We have the right recipe as we have established an impressive pipeline foothold in the country.”
“We do what we say we are going to do, we’re open, transparent and ethical. We work with local and Indigenous communities, and we treat people with respect.
“Because of those values, TransCanada has been embraced in Mexico.”
#5: Technology
Mexico seeks innovative solutions in developing infrastructure and TransCanada has already delivered in recent projects with leading edge construction techniques such as tunneling horizontally through a mountain, tunneling vertically down a cliff face or using a gondola system for construction on a steep mountain slope.