Mexico State Power Company Plans $10 Billion in Projects

Biggest project is an underwater 500-mile pipeline from Brownsville, Texas to Mexican port of Tuxpan

By ANTHONY HARRUP
June 22, 2015 3:29 p.m. ET 0 COMMENTS

MEXICO CITY—Mexico’s state-owned electricity utility Comisión Federal de Electricidad unveiled plans Monday to tender projects for close to $10 billion, including an 800-kilometer submarine pipeline to carry natural gas from southern Texas to the Mexican Gulf Coast.

The 24 projects include five natural gas pipelines, three small pipeline branches, four power generation stations and a series of electricity transmission and distribution projects.

The biggest of the pipeline projects is a $3.1 billion underwater line from Brownsville, Texas to the Mexican Gulf port of Tuxpan. The 800-kilometer (500-mile) pipeline will have capacity to transport 2.6 billion cubic feet a day of gas, and will supply CFE power plants in the Gulf Coast states of Tamaulipas and Veracruz, among other regions. The contract is expected to be awarded in December, and the pipeline to go into operation in mid-2018.

The line is expected to connect to another pipeline planned from Nueces to Brownsville in southeastern Texas, which is expected to require investment of $1.55 billion.

The projects, most of which are scheduled to start operating in 2017 and 2018, will add around 2,300 kilometers to the country’s gas pipeline network, 1,442 megawatts of electricity generating capacity, and more than 3,000 kilometers in transmission and distribution lines, CFE Chief Executive Enrique Ochoa said at an event.

Mexico began a major push to expand its natural gas pipeline network after missing out on the benefits of the U.S. shale gas boom that lowered prices of the fuel in North America. The lack of pipeline infrastructure in 2012 and early 2013 meant Mexico was unable to take advantage of the lower prices, and was forced on numerous occasions to cut gas supplies to the industry to maintain stability of the network.

Mr. Ochoa said that with the new pipelines—and the 11 that are already under construction or being tendered—Mexico will meet the goal of expanding its natural gas pipeline network by 75% during the current administration, which ends in December 2018.

It has now been two years since Mexico had a “critical alert” restricting gas supplies to industry, he said.

Under changes made last year in Mexico’s energy laws, CFE will begin facing competition from private sector power generators. The company has promoted construction of gas pipelines to ensure supplies for its power plants as it gradually switching to natural gas which is cleaner and cheaper than other fuels.

State oil company Petróleos Mexicanos has also been promoting natural gas pipelines, including the Los Ramones line that runs from Texas to an industrial region in central Mexico. Pemex recently sold a stake in the Los Ramones line to BlackRock Inc. and First Reserve Corp.

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