TC Energy and the Comisión Federal de Electricidad (CFE), the state-owned electric utility of Mexico, have agreed to form a strategic alliance to speed up the development of natural gas infrastructure in the central and southeast regions of the country.

The two entities have agreed to consolidate earlier transportation service agreements (TSAs) executed between TC Energy’s Mexico-based subsidiary TGNH and the CFE with regard to the natural gas pipeline assets in central Mexico under a single, US dollar-denominated take-or-pay contract that extends through 2055.

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These natural gas pipeline assets include the Tamazunchale, Tula-Villa de Reyes (TVDR), and Tuxpan-Tula (TXTL) pipelines.

Now this new TSA will also govern associated new infrastructure projects to be developed along with the CFE.

TC Energy president and CEO François Poirier said: “We are pleased to have been selected by the CFE as its partner and to forge this strategic and important public-private partnership, a first-of-its-kind in the CFE’s 85-year history.

“This alliance capitalizes on each of our strengths. Together, TC Energy and the CFE will develop critical energy infrastructure to serve the growing central and southeast regions of Mexico.

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“The Southeast Gateway Pipeline will be TC Energy’s second marine natural gas pipeline in Mexico, connecting to the coastal regions of Veracruz and Tabasco, and is another prime example of our ability to originate world-class projects that offer incremental growth to our long-term outlook.”

With regard to the strategic alliance, TC Energy and the CFE have reached a final investment decision to go ahead and build the Southeast Gateway Pipeline, a 1.3 billion cubic feet per day, 715km offshore natural gas pipeline.

The project is estimated to cost $4.5bn.

Subject to review and approvals, the agreements between TC Energy and the CFE enable sharing of costs above those approved at FID.

Project development and execution will leverage TC Energy’s previous experience in constructing the 770km, 2.6 billion cubic feet per day offshore Sur de Texas pipeline that was placed into service in 2019, almost three years after FID.

The Southeast Gateway Pipeline will begin onshore in Tuxpan, Veracruz, and then proceed offshore, making landfall at Coatzacoalcos, Veracruz and Dos Bocas, Tabasco.

It is expected to be in-service by mid-2025.

After positive FID, in-service of the Southeast Gateway Pipeline project and subject to some other conditions, the CFE’s equity interest in TGNH would be 15%.

At the end of the pipeline’s contract life in 2055 and following recovery of full return on capital by TC Energy, the CFE’s equity interest in TGNH would increase to around 35%.

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Image: The Southeast Gateway Pipeline is expected to be in-service by mid-2025. Credit: LoggaWiggler from Pixabay.