After months of negotiations, the Mexico president realized a major victory on Aug. 27 when he successfully convinced four companies to take big cuts in profits on natural gas pipelines contracts negotiated under old administration.
The deal brokered by President Andres Manuel Lopez Obrador and the state-run power utility company Federal Electricity Commission (CFE) could save taxpayers as much as $4.5 billion over time, according to a Wall Street Journal report. Mexico will pay the companies significantly less to import natural gas, which will mean a savings to the citizens.
The four companies the Mexico government had been negotiating with are Canada’s TC Energy, Carlos Slim’s Grup Carso, Sempra Energy’s iEnova and Mexico’s Fermaca. The renegotiated contracts could increase Mexico’s natural gas import capacity by 40%.
The agreements also end a dispute over the $2.5 billion South Texas-Tuxpan natural gas pipeline that was completed in June but has not been in operation. The South Texas-Tuxpan pipeline is an underwater natural gas pipeline between Texas and Veracruz, Mexico and is Mexico's first subsea pipeline. It was developed by the CFE and built by TC Energy Corp and iEnova.
The deal Lopez Obrador, the leftist who took office in December, and CFE reached with the four companies appears to be a significantly greater savings than $600 million in normal savings Mexico’s government was reportedly seeking during the last several days.
Pipeline will begin in Tula in the state of Hidalgo, and terminate in Villa de Reyes in the state of San Luis Potosí, transporting natural gas to power generation facilities.
Firm transportation capacity can be acquired under minimum 10-year term agreements on the Howard Lateral and the Wolfcamp Connector expansion.
Some land storage tank capacity levels are above 70%, near the maximum, according to traders, Reuters said. Vitol booked two 90,000 tonne tankers offshore the U.K. to store diesel.