TransCanada Moves Into Mexico With $800 Million Project

  • Canadian company to invest in, operate Tuxpan marine terminal
  • Pipeline will transport refined products to central Mexico

TransCanada Corp. is placing a bet on Mexico’s demand for fuels.

The Calgary-based pipeline owner is joining with the Mexican company Sierra Oil & Gas to build an $800 million marine terminal and pipeline in the Mexican port of Tuxpan, the companies said in a statement. The project will transport gasoline, diesel and jet fuel to central Mexico.  

Mexico, the largest importer of U.S. fuel, gets an infrastructure boost. The nation relies on imports for 55 percent of its gasoline needs, according to June data from Petroleos Mexicanos, the state-owned oil company. Pemex has struggled to process enough crude at its six refineries and has said it’s seeking partners to help with operations and improvements.

“There are not that many markets in the world where you can build a refined products infrastructure project of this scale, and Mexico is one of them,” Ivan Sandrea, chief executive officer of Sierra, said in a telephone interview. “Mexico needs more import infrastructure to meet growing fuel demand; I cannot see the country moving forward without that.”

Joint Venture

TransCanada, which announced in March that it would sell minority stakes in its $2 billion Mexican natural gas pipeline business to help fund the $10.2 billion purchase of Columbia Pipeline Group Inc., will have a 50 percent stake in the project. Sierra, which is backed by Riverstone Energy Ltd and which won oil blocks in the country’s first competitive oil auctions, will have 40 percent. The remainder is owned by Mexico City-based Grupo TMM SA, a Latin America-focused maritime transportation company.

”We are extremely excited for this project which represents an important expansion of our portfolio in Mexico," said Robert Jones, TransCanada’s Mexico president, in an emailed statement. “TransCanada’s construction and operating experience will provide significant synergies to safely transport refined products in the central region of the country.”

The company’s shares rose 0.4 percent to C$60.74 at 2:57 p.m. Tuesday in Toronto.

“TransCanada has had a lot of success in Mexico, they generate favorable returns” from their natural gas pipelines, Steven Paget, energy analyst at FirstEnergy Capital Corp. in Calgary, said by phone. “They know what they are doing in fuels and they are going where the opportunities are.”

Docks, Storage

The project envisions a marine terminal at the mouth of the Tuxpan River with a draft of 42 feet (14 meters), four docks and storage capacity of about 900,000 barrels. Truck loading and barge access will enable the terminal to meet demand from other ports along the Gulf Coast.

It will be connected to distribution centers in central Mexico by a 265-kilometer (165-mile) refined products pipeline with capacity of some 100,000 barrels a day -- to be built alongside TransCanada’s natural gas pipeline project from Tuxpan to Tula, utilizing its existing "right of way" access permit.

Construction will start in the second quarter of next year, with operations due to start in the following two years. The first dock will be up and running by early 2018, Sandrea said.

“We are working on the marine terminal, in terms of preparing the land, and we are very advanced on many of the permits,” he noted. “We have already been approached by a number of interested parties, so we are expecting our project to receive strong bids for capacity.”

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