Kinder Morgan’s El Paso Natural Gas on Wednesday inked a 25-year transportation agreement related to plans to expand gas service to northern Mexico. The company is not divulging who the party or parties are on the other end of the agreement, a Houston-based Kinder Morgan Inc. (KMI) spokesperson told NGI.

El Paso is now owned 50-50 by KMI and its affiliate, Kinder Morgan Energy Partners (KMP).

Operating through El Paso’s affiliate, Sasabe Pipeline Co., the long-term deal calls for the unnamed party(ies) to get 200 MMcf/d of firm transportation capacity on a proposed 60-mile, 36-inch-diameter lateral from El Paso’s southern interstate pipeline system in Arizona to a point south of Tucson near the international border at Sasabe, AZ.

The KMI companies recently held a binding open season on the project (see Daily GPI, Oct. 19). The KMI spokesperson said that depending on the regulatory approvals, construction could begin in early 2014 and the pipeline could be in service by September that year.

The $200 million lateral project could provide new jobs in Arizona and help open up more long-term gas exports to Mexico, according to Mark Kissel, president of KMP’s west region. This project is part of an eruption of pipeline projects busting out throughout Mexico in response to its energy ministry’s master plan calling for stepped-up conversions and new generation plant construction of gas-fired plants that use low-priced U.S. gas.

At the same time, Mexico plans to step up exports of its own additional natural gas production to Central American-markets, according to a partner in a well connected Houston energy law firm.

Units of both Sempra Energy and TransCanada Corp. recently were awarded multi-billion-dollar contracts for major new gas pipelines south of the border (see Daily GPI, Nov. 2).

The El Paso agreement is an outgrowth of the action by Mexico’s Comision Federal de Electricidad (CFE) last May, issuing an invitation for private-sector companies to bid on building a new natural gas pipeline from the U.S.-Mexico border near Sasabe to Guaymas in Senora, Mexico. That project is part Sempra’s contract with the Mexican government.

From CFE’s perspective, the objective is to “supply existing fuel oil-fired generation plants that will be converted to natural gas, along with other new gas-fired power generation plants that will be built during the next 15 years,” a spokesperson for the El Paso-KMI project said.

Sasabe Pipeline ultimately requires approval from the Federal Energy Regulatory Commission and a presidential permit for an interconnection with a border crossing to connect with Sempra’s project in Mexico.

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