TransCanada Corp. announced Thursday that Mexico's state-owned electric utility, the Comision Federal de Electricidad (CFE), has awarded the company's Mexican subsidiary a contract to build, own and operate a natural gas pipeline across the northern part of the country.

TransCanada's said it expects to invest approximately $1 billion in the Topolobampo Pipeline project, which is supported by a 25-year gas transportation contract with the CFE. Its subsidiary, Transportadora de Gas Natural del Noroeste, will build the 30-inch diameter, 530-kilometer (329 mile) pipeline beginning in El Encino, Chihuahua State, and terminating at Topolobampo, Sinaloa State.

"Mexico's government is engaged in a comprehensive plan to expand the nation's electrical grid and generating capacity, and much of that generation will be natural gas-fired," said TransCanada CEO Russ Girling. "This award is another example of [our] commitment to help develop Mexico's energy infrastructure in a sustainable and cost-efficient manner."

The pipeline will have a contracted capacity of 670 MMcf/d and is expected to be online in 3Q2016. Its completion is expected to spur the construction of more pipelines in the region, which will interconnect with the Topolobampo line. The CFE will hold separate bids for the interconnections.

"This project is a response to a CFE invitation to bid," Girling said, adding that the company welcomed the opportunity to bid on more CFE projects. "As Mexico makes the transition from fuel oil to cleaner-burning natural gas, there will be additional opportunities for TransCanada. These opportunities are consistent with our strategy to build long-life infrastructure, underpinned with long-term contracts."

TransCanada has been working in Mexico for decades. In 2011, it completed the 192-mile, 30-inch Guadalajara Pipeline, a $360 million project that included a 25-year natural gas contract with the CFE. The company had won the contract for the project in 2009 (see Daily GPI, June 21, 2011; May 8, 2009).

Meanwhile, TransCanada owns and operates the 81-mile Tamazunchale Pipeline and will soon break ground on an extension. In the 1990s, the company built the Mayakan and El Bajio pipelines, which were the first pipelines in Mexico not owned by the state-owned petroleum company, Petroleos Mexicanos (Pemex). TransCanada eventually sold the pipelines.

Several projects are in the works in Mexico to meet the growing demand for natural gas, especially for power generation. The CFE plans to build five power plants over the next 15 years in the states of Chihuahua, Durango and Coahuila in northern Mexico. Concurrently, the Energy Information Administration (EIA) says Mexico imported 499 Bcf of natural gas from the United States in 2011, a nearly 50% increase from 2010.

Last month the CFE awarded two contracts to Sempra Mexico, a subsidiary of Sempra International, to build, own and operate a 500-mile natural gas pipeline network in northwestern Mexico (see Daily GPI, Oct. 29). The $1 billion project will be built in two parts, connecting Mexico to the U.S. interstate pipeline system and providing natural gas to new and existing CFE power plants that are currently using fuel oil.

Kinder Morgan's El Paso Natural Gas Co. LLC (EPNG) recently launched a binding open season for a proposed new pipeline that would extend from its South Mainline System near Tucson, AZ, to the U.S.-Mexico border near Sasabe, AZ. The Federal Energy Regulatory Commission (FERC) recently approved two companion applications to allow EPNG to modify its border-crossing facilities in Arizona (see NGI, Oct. 22).

In August, FERC approved EPNG's request for a presidential permit to build the Norte Crossing facilities at the border, which include 1,500 feet of 36-inch pipeline running under the Rio Grande River and connecting to the proposed Tarahumara Pipeline in Mexico.

Also in 2012, Spectra Energy Corp.'s Texas Eastern Transmission LP proposed a pipeline expansion to carry Eagle Ford Shale gas across the border to a delivery point with Pemex. Spectra said the expansion could begin service in the summer of 2014 and would have a maximum capacity of 300,000 Dth/d.

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