TransCanada finds warmer welcome in Mexico for pipeline business
CEO Russ Girling sees the need for more pipelines as the country modernizes
The tropical heat of Mexico is a welcome break for Canadian snowbirds looking to escape a freezing winter.
For Russ Girling, the country is also providing a getaway from all the punches and kicks he's taken trying to build pipelines in Canada and the United States.
At home, the CEO of TransCanada spends billions of dollars, waits several years, and still doesn't know when the company can install new pipes in the ground.
Meanwhile, the environmental opposition is such that even Girling's own mother has called him in recent years to ask "Russ, are you going to blow up the planet?"
We foresee there will be more opportunities on the horizon in Mexico.– Russ Girling, TransCanada CEO
Down in Mexico, well, life is much easier.
The regulatory oversight and environmental opposition is a fraction of what it is in Canada and the United States for a company looking to construct new pipelines.
Lower costs, fast results
Girling painted a picture at the company's recent annual general meeting in Calgary about how much cheaper and simpler the process of approving a pipeline is in Mexico. In that country, it costs TransCanada about $5 million to bid on a project. Compare that to the $2.5 billion US the company spent on Keystone XL in the U.S. and the $700 million it has already invested in the Energy East project in Canada.
In addition, if TransCanada's bid in Mexico is successful, the company receives its permits, begins working with landowners and construction begins "right away."
The Keystone XL oil pipeline proposal took seven years before a decision was made. The project is shelved in the U.S. after President Barack Obama denied a permit. Without a permit, the company launched a lawsuit and a multibillion-dollar North American Free Trade Agreement claim to try to recoup its losses.
With Energy East, there is no certainty the national regulator and the federal government will ultimately grant a permit.
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"Clearly, what we have found is the risk that we need to take in Mexico to participate in a large-scale infrastructure investment is far less," said Girling.
While the regulatory road is much easier to travel for TransCanada, the reward for each project is not as large, since the projects in Mexico are much smaller than those proposed elsewhere in North America.
Four natural gas projects in the works in Mexico have a value of $2.5 billion. Meanwhile, the Energy East oil pipeline in Canada would cost $15.7 billion, and a pair of natural gas pipelines in British Columbia to serve new liquefied natural gas export facilities are estimated at $9.8 billion.
The payoff will come as the pipelines keep adding up. TransCanada has a total of six projects in Mexico — two operating, three under construction and one under development.
"Mexico has been a very good place for us to do business," said Girling. "I have a very positive long-term view of the growth of Mexico and its position in North America."
Girling points to the country's expanding population, increasing energy consumption and ideal geographical location as an exporter.
"We foresee there will be more opportunities on the horizon in Mexico," he said.
TransCanada first entered the country in the mid-1990s, when the company constructed a pair of pipelines.
Little environmental opposition
Operating in Mexico also provides much less opposition from environmentalists. who have targeted pipeline companies as a way of restricting growth of oil production.
The Keystone XL project in particular drew criticism, even from celebrities like Robert Redford.
But down in Mexico? The stiff opposition from environmentalists, politicians and regulators just doesn't exist.