Texas governor urged Mexico to speed natgas line talks

Texas' governor urged Mexico's president to quickly conclude contracts renegotiations for natural gas pipelines held by US and other companies to avoid jeopardizing ratification of the US-Mexico-Canada Agreement (USMCA).

"Lingering questions about Mexico-US-Canada project delays and longstanding contracts and business commitments could negatively impact our economies for years to come," governor Greg Abbott said in a 25 July letter to Mexican president Andres Manuel Lopez Obrador. "Mexico and Texas will both benefit if your administration can quickly conclude your review and allow the newly constructed pipelines to begin transporting clean natural gas across our shared border."

The USMCA to replace the North American Free Trade Agreement (Nafta) is still awaiting legislative approval in the US after Mexico became the first country to approve it in June. Abbott noted that any Nafta violations or failure to honor contracts could jeopardize the chances of USMCA's passage in the US.

The largest pipeline contract being renegotiated is the 2.6 Bcf/d (74mn m³/d) Sur de Texas-Tuxpan, in which US-based Sempra Energy's Mexican subsidiary IEnova holds a minority 40pc stake in a joint venture with Canada's TC Energy. More than a month after its completion, the Sur de Texas-Tuxpan pipeline is still awaiting a final green light from Mexican regulator CFE, delaying a potential 50pc increase in US natural gas import capacity into Mexico.

TC Energy is the operator and holds another two pipeline contracts — the 886mn cf/d Tuxpan-Tula and Tula-Villa de Reyes.

Abbott stressed that Texas' excess natural gas can benefit its southern neighbor given Mexico's dependence on the fuel to power the country — 51pc of Mexico's electricity is generated with natural gas.

"Mexico consumes more gas than it produces," he said. "New pipeline projects can provide Mexico with an abundant supply of natural gas by safely transporting gas from oversupplied Texas to Mexican power plants and manufacturers."

Mexico imported as much as 6 Bcf/d in 2018 mostly from the US to meet growing demand, which hovers at some 8 Bcf/d. Some 3.5 Bcf/d are needed for electricity generation every month.

In order to increase natural gas availability nationwide, CFE signed 24 pipeline contracts under the former administration of president Enrique Pena Nieto as part of the country's 2014 energy reform. But since February the Lopez Obrador administration has called for renegotiation of seven of those contracts held by four companies for pipelines under force majeure — mostly because of community conflicts. CFE wants to recover the outlays it must make because pipelines are not online. And before negotiations began formally a month ago, CFE filed international arbitration requests.

Roundtable and one-to-one company negotiations are in their fourth week. Leaders from two major Mexican business associations — Javier Trevino Cantu from the business coordination council (CCE) and Antonio del Valle Perochena, director of the Mexican business council (CMN) — have been part of the negotiations with presidential adviser Alejandro Esquer and Mexican power company director Manuel Bartlett.

Apart from Sur de Texas-Tuxpan, CFE has another six pending pipelines contracted — one with IEnova, another one with billionaire Carlos Slim's Grupo Carso, and two with Mexican pipeline company Fermaca.

Lopez Obrador recently said he would talk directly with communities and groups opposed to the pipelines, saying he will make it clear that it is "the people" who are losing money from the payments CFE is having to make to pipeline companies because of the project delays.

More recently, interior undersecretary Ricardo Peralta held talks with the only indigenous Yaqui community that opposes IEnova's halted Guaymas-El Oro pipeline out of eight communities along the pipeline's route in an effort to mend relations.