TC Energy Corp. now expects the phased entrance into service of the 886 MMcf/d Tula-Villa de Reyes pipeline in Mexico to occur in early 2020, CEO Russell Girling said Friday during a third-quarter earnings call.
Last quarter, the company had set a target of late 2019.
“Construction of the Villa de Reyes project is ongoing, however the project has experienced force majeure events that have delayed the schedule,” TC Energy said in its 3Q2019 report to shareholders.
Energy ministry Sener has said that the project’s completion depends upon the conclusion of an “archaeological rescue” along the pipeline route.
Upon completion, the 261-mile conduit will connect to TC Energy’s operating Tamazunchale pipeline, and to the Tuxpan-Tula pipeline, whose construction has been held up by a pending indigenous consultation process by Sener.
Tuxpan-Tula will not enter service until two years after the consultation process has successfully concluded, Girling told analysts, without specifying when this milestone is expected to occur.
Last quarter, TC Energy projected Tuxpan-Tula to enter service by end-2021.
Tamazunchale is one of three delivery points for the 2.6 Bcf/d Sur de Texas-Tuxpan subsea pipeline, which entered commercial operation in September.
The marine pipeline is owned by Infraestructura Marina del Golfo (IMG), a joint-venture composed of TC Energy and Infraestructura Energética Nova (IEnova), the Mexico subsidiary of San Diego, Calif.-based Sempra Energy.
Mexican state power utility Comisión Federal de Electricidad (CFE) is the pipe’s anchor customer under a 35-year firm transport service contract for the entire 2.6 Bcf/d capacity.
IMG and CFE recently agreed to extend the contract tenor from the previous duration of 25 years, and to switch from a fluctuating toll profile over the life of the contract to a levelized toll structure based on actual construction costs. CFE general director Manuel Bartlett Díaz had complained that the original contract terms were unfair.
Under the amended contract, CFE will pay an initial fixed toll for the first 25 years of the contract term and a higher fixed toll over the last 10 years of the contract, TC Energy said.
“All other terms and conditions of the contract remain substantially unchanged,” Girling said.
Similar negotiations with CFE pertaining to the Tuxpan-Tula and Tula-Villa de Reyes projects are ongoing, TC Energy said, “with the expectation of reaching agreements before the end of 2019.”
The company said it has received “certain capacity payments” under the force majeure provisions of the Tuxpan-Tula and Tula-Villa de Reyes pipelines, but that it has not begun recording revenue from these projects.
The Texas-Tuxpan, Tuxpan-Tula, and Tula-Villa de Reyes projects are all meant to shore up Mexico’s gas supply from the United States, and to ease shortages of the fuel in Mexico’s gas-starved south and southeastern regions.
Pipeline natural gas exports from the United States to Mexico averaged 5.39 Bcf/d in August 2019, up from 4.98 Bcf/d for the same month last year, according to the U.S. Energy Information Administration.
TC Energy reported net income attributable to common shares of C$739 million ($562 million), or C$0.79/share, for the third quarter, compared to C$928 million, or C$1.02/share, for the same period in 2018.