TransCanada Corp. and the Mexican unit of Sempra Energy on Monday won a contract to build a 500-mile offshore pipeline to carry natural gas from South Texas to northeastern Mexico.

The Wall Street Journal is reporting that TransCanada Corp. and the Mexican unit of Sempra Energy on Monday won a contract to build a 500-mile offshore pipeline to carry natural gas from South Texas to northeastern Mexico.

Infraestructura Marina del Golfo, which is 60% owned by TransCanada and 40% by Infraestructura Energética Nova SAB, bid $2.1 billion to build, own and operate the pipeline from Brownsville, Texas, to the Mexican Gulf port of Tuxpan.

The line will run under the Gulf of Mexico with capacity to transport 2.6 billion cubic feet a day of natural gas. It will supply power plants of Mexican state electric utility Comisión Federal de Electricidad, or CFE, under a 25-year service contract. The CFE said the transport tariff offered was among the most competitive globally.

“The South Texas-Tuxpan gas pipeline will contribute to CFE's strategy of replacing expensive and polluting fuels such as fuel oil and diesel in generating electricity,” the utility said.

The bid was the only one for the project, and was well below the $3.1 billion cost that the CFE had initially estimated. An earlier second bidder, Ducto Mar Gas, had been disqualified as it had no offshore construction experience and failed to meet financial guarantees, the CFE said.

The $3.1 billion was the maximum that CFE would accept, so with the competitive bid the utility gets a 30% reduction from its cap, said Robert Jones, president of Mexico operations for TransCanada.

TransCanada currently has three pipelines operating in Mexico, and Monday's project award, along with others under construction will bring it to eight, with an investment of about $5 billion. ”We think Mexico is a great place to do business,” Mr. Jones said.

TransCanada was among the first private companies to build natural ggas pipelines in Mexico in the mid-1990s when transport and distribution of the fuel were opened to the private sector.

Source: The Wall Street Journal

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