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Uncertainty with Mexico plan to force TC Energy to divert gas pipeline

Krisztian Bocsi/Bloomberg

Mexico Plan to Divert Gas Pipeline Seen Heightening

- Lopez Obrador said the new route will avoid indigenous lands
- Mexico will compensate TC Energy to move its pipeline project

By Amy Stillman/ Bloomberg

Petroleumworld 01 08 20120

Mexico's move to divert a TC Energy Corp. gas pipeline from indigenous lands is reigniting concerns over the future of energy projects in the country.

The plan to deviate the Tuxpan-Tula conduit in central Mexico, announced by President Andres Manuel Lopez Obrador over the weekend, follows a restructuring of contracts last year that forced pipeline operators to cut shipping rates.

The decision creates a precedent that could be replicated as local communities have opposed several pipeline projects in Mexico, stalling construction and leading to a slowdown in investment, said Nina Fahy, head of North American natural gas for consultancy Energy Aspects Ltd .

Diverting the pipeline is “really opening up a can of worms” because many other projects face similar issues, and moving them could prove costly, she said from New York. “Indigenous consultations have stalled out other pipeline projects in Mexico as well.”

Lopez Obrador announced the plan after holding a consultation with the Otomi, Nahuatl, Totonaco and Tepehua indigenous communities in the city of Pahuatlan. He pledged to compensate TC Energy.

TC Energy didn't respond to requests for comment.

“They are trying to avoid any legal problems, and international controversies,” said Rodrigo Rosas, a Mexico gas analyst for energy consultancy Wood Mackenzie Ltd .

Mexican pipeline operator Fermaca Enterprises' Villa de Reyes-Aguascalientes-Guadalajara pipeline and the Guaymas-El Oro pipeline operated by Sempra Energy 's IEnova also face holdups due to social conflicts, said Rosas.

By Amy Stillman from Bloomberg. 01 07


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