TC Energy, Mexico’s CFE agree to develop $4.5 billion gas pipeline, suspend arbitration

MEXICO CITY (Reuters) – Canadian pipeline operator TC Energy and Mexican state utility Comision Federal de Electricidad on Thursday agreed to develop a $4.5 billion pipeline, suspending international arbitration proceedings as they formalised a strategic alliance.

The deal and the details of their cooperation come as Canada and the United States are having their most serious trade spat with Mexico over energy policies under the United States-Mexico-Canada Agreement (USCMA).

TC Energy said in a statement that it would work with CFE, as the Mexican utility is known, to develop and construct the Southeast Gateway Pipeline. The planned 715 kilometre (444 mile) pipeline is intended to move 1.3 billion cubic feet of gas per day, supplying gas to the growing central and southeast regions of Mexico.

As part of the deal, the two companies agreed to consolidate existing assets, including the Tamazunchale pipeline as well as the Tula-Villa de Reyes and Tuxpan-Tula pipelines that had been disputed between the pair.

Their public-private partnership involves a single, dollar-denominated, take-or-pay transportation service agreement that extends through 2055.

(Reporting by Ruhi Soni in Bengaluru; Additional reporting by Stefanie Eschenbacher in Mexico City; Editing by Kenneth Maxwell)