TransCanada halts work on delayed Mexico gas lines

Construction of TransCanada's Tuxpan-Tula and Tula-Villa de Reyes pipelines is officially suspended after years of delays, a TransCanada spokesman told Argus.

The projects have already suffered over 56 months of combined delays, namely from unresolved disputes with local communities in Puebla and Hidalgo states. According to the company's latest quarterly report, Tula-Villa de Reyes would be in service by the second half of 2019 and Tuxpan-Tula through 2020.

"Our work in Puebla state awaits Sener's indigenous consultation for specific areas in the pipeline's route," the spokesman told Argus. Sener's consultation process for four municipalities in Puebla and two in Hidalgo has not been completed in two years.

Despite delays, TransCanada said that neither of the projects has been cancelled and that the company's "work continues on both projects in different parts" of the pipeline routes while it "evaluates options with respect to the current route in the state of Hidalgo."

The $458mn Tuxpan-Tula project was initially announced in 2015 and should have been in operation by March 2017. And the $554mn Tula-Villa de Reyes pipeline's construction was suspended by Mexico's National Anthropology and History Institute in the first quarter of 2018 after the line's route crossed new archaeological finds in the states of Queretaro and Guanajuato within the so-called Huasteca region.

Construction of the 287km, 886mn cf/d Tuxpan-Tula pipeline is at an advanced stage but ongoing problems with locals hampering permits and charging right of way fees led the delays in the gas project. It sought to be one of CFE's signature pipeline tender projects aiming to provide natural gas to replace fuel oil powered plants through a 25-year contract.

Gas would be routed from the port of Tuxpan in Veracruz state, run through Puebla state and cater to Tula in Hidalgo state in Mexico's central region after gas volumes from the underwater 2.6Bcf/d Sur de Texas-Tuxpan line — a TransCanada-IEnova venture — would begin flowing through 1Q 2019. Once gas would reach Tula in Hidalgo state, it would enter TransCanada's proposed 279km, 886mn cf/d Tula-Villa de Reyes line, which would run north to San Luis Potosi state.

TransCanada's said in its latest earnings statement that the CFE approved force majeure events for both pipelines, "including the continuation of the payment of fixed capacity charges" to the company starting on 1Q 2018, which TransCanada will begin to recognize "as revenue when the pipelines are placed in service."

The Tula-Villa de Reyes line would also connect to Fermaca's Villa de Reyes-Aguascalientes-Guadalajara proposed pipeline, which is also delayed and has yet to be completed. Fermaca has not replied to requests from Argus on the pipeline's current status.