TransCanada, Sempra, Spectra Win Texas-Mexico Gas Line Contracts

Updated on
  • Mexico’s CFE awards $3.6 billion in natural gas pipelines
  • Companies to develop projects that connect Mexico to U.S.

Eagle Ford shale producers are getting a new outlet to ship their abundant natural gas to Mexico as the southern neighbor seeks supplies to increase power generation.

A unit of Spectra Energy Corp. and a joint venture between Sempra Energy’s Ienova and TransCanada Corp. won contracts to link the Agua Dulce Hub on the Texas Gulf Coast to a major port in Mexico.

The Comision Federal de Electricidad, Mexico’s state-run utility, awarded Spectra’s Valley Crossing Pipeline LLC a $1.5 billion contract to develop a 168-mile pipeline connecting Agua Dulce, near Corpus Christi, to Brownsville on the border. The TransCanada-Ienova venture will build a $2.16 billion, 800-kilometer (497-mile) underwater line to ship the gas from Brownsville to the Tuxpan port, a Mexican shipping hub for tankers supplying petroleum products to state-run Petroleos Mexicanos.

The contract mitigates investor concern about Ienova’s ability to continue winning projects in Mexico and gives more credibility to previously announced growth plans, Vanessa Quiroga, Latin America equity analyst at Credit Suisse Group AG, wrote in a research note.

Key Demand

Spectra’s pipeline will provide natural gas to support Mexico as its electricity generation shifts away from fuel oil and connects the company to "another key demand-pull market," Bill Yardley, the company’s president of U.S. Transmission and Storage, said in a statement.

The projects are the two largest awarded this year by the CFE, as Latin America’s largest utility is known, and are part of its plans to expand Mexico’s pipeline infrastructure 75 percent by 2018. The joint venture between TransCanada and Infraestructura Energetica Nova SAB, as Sempra’s unit is formally called, was the sole bidder for the underwater pipeline, while Spectra beat out two rivals.

The underwater line is forecast to be completed in 28 months.