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Mexico's president says he's renegotiated pipeline contracts with Canadian and U.S. companies

Mexico's president says his government has reached a deal with private natural gas pipeline operators to solve a dispute over fees and payments.

Andres Manuel Lopez Obrador said deal will save Mexico billions

In this July 1, 2019 file photo, Mexico's President Andres Manuel Lopez Obrador, pictured during rally July 1, in Mexico City, says his government has reached a deal with private gas pipeline operators to solve a dispute over fees and payments. (Fernando Llano/The Associated Press)

Mexico's president says his government has reached a deal with private natural gas pipeline operators to solve a dispute over fees and payments.

The pipelines would allow Mexico to import U.S. natural gas and distribute gas throughout Mexico. President Andres Manuel Lopez Obrador said the private companies, one of which is believed to be Calgary-based TC Energy Corp., had taken advantage of the country when the contracts were signed under previous administrations.

Lopez Obrador said Tuesday that companies from the U.S., Canada and Mexico had agreed to restructure fees. He said the companies accepted about a 30 per cent lower profit margin.

The president said the deal would save Mexico — especially the national electricity utility — as much as $4.5 billion over the next three decades.

In its recent second-quarter financial report, TC Energy said its Mexican state power utility customer had filed in June for arbitration on contracts for three of its natural gas pipelines, seeking nullification of clauses related to force majeure — unforeseeable circumstances that would prevent a contract from being fulfilled — and reimbursement of fixed capacity payments.

It said it had completed construction and commissioning for its Sur de Texas gas import pipeline but had not yet been allowed by the regulator or customer to begin service. Meanwhile, construction was continuing despite delays on its Villa de Reyes project to be completed later this year and its Tula project, where the targeted completion date has been pushed back to the end of 2021.

"In our view, the contracts were properly established in accordance with all original bid and regulatory requirements and remain valid and enforceable," TC reported. "We will defend them as necessary through the arbitration proceedings."

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