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TransCanada to build Mexican gas pipelines

Mexico is pressing ahead with plans to increase the use of natural gas in its power sector

As part of the move, the federal government has awarded Calgary-based TransCanada two contracts worth $1.4 billion to build, own and operate new natural gas pipelines.

The 530 km El Encino-to-Topolobampo pipeline will have capacity of 670 million cubic feet per day (cf/d), while the 413 km Mazatlan pipeline will carry 202m cf/d.

Construction of the two new pipelines is supported by 25-year natural-gas transportation service contracts with the Comisión Federal de Electricidad (CFE), Mexico’s federal power company.

The Topolobampo pipeline begins in El Encino, in the state of Chihuahua, and ends in Topolobampo, in the state of Sinaloa. The interconnecting Mazatlan pipeline will begin at El Oro and end in Mazatlan, also in Sinaloa.

Topolobampo carries a $1bn price tag while the Mazatlan link will cost $400m. Both are expected to be in service in the second half of 2016.

TransCanada said it was invited to bid in a public tender process and is participating in other CFE tenders. TransCanada has already built and is operating the Guadalajara and Tamazunchale pipelines and will soon break ground on a Tamazunchale pipeline extension.

As Mexico’s power-generation sector makes the transition from fuel oil to cleaner-burning natural gas, TransCanada said it sees further opportunities to expand in Mexico.

“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,” Russ Girling, TransCanada’s chief executive officer said.

Meanwhile, Mexico is keen to increase domestic production of shale oil and natural gas following the US example in Texas’ Eagle Ford play, government officials told a shale-gas conference in Houston in September.

Mexico has 54.7bn barrels of oil equivalent (boe) of conventional resources. Yet preliminary estimates suggest Mexico’s shales could hold a further 60.2bn boe, which would more than double its resource base. About 25% of the potential additional reserves are thought to be liquids and wet gas.

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