TransCanada Corp. has joined a consortium proposing an $800-million (U.S.) marine terminal, pipeline and distribution network to feed Mexico's growing appetite for gasoline, diesel and jet fuel.
The Canadian pipeline firm will expand its footprint in Mexico in a development deal with Sierra Oil and Gas S. de R.L. de C.V. and marine shipper Grupo TMM, both headquartered in Mexico City. If constructed, the project will see refined product from the U.S. Gulf Coast shipped and delivered to markets in central Mexico.
As it struggles against negative public sentiment and high regulatory costs for new domestic pipeline projects such as the $15.7-billion (Canadian) Energy East, TransCanada chief executive officer Russ Girling has said Mexico is a good place to do business and is ripe for growth. The company now has eight Mexican projects – either operating, under construction or under development.
On Tuesday, the company said it will pay $400-million (U.S.), or half the costs, to develop the project that includes a 100,000-barrel-a-day, 265-kilometre refined products pipeline that will parallel its Tuxpan-Tula natural gas pipeline. The deal also includes a marine terminal near Tuxpan in the state of Veracruz for offloading and distribution, and an inland storage and distribution hub in central Mexico.
The company said the proposed project would be the largest single investment in refined products since Mexico initiated in 2013 a sweeping set of changes that ended the 75-year monopoly of Petroleos Mexicanos, or Pemex, and lifted a ban on direct foreign investment in the oil and gas sector.
"With energy reform, it's allowed TransCanada and others in this joint proposal to meet demand – a demand that continues to grow," TransCanada spokesman Mark Cooper said.
Reuters reported earlier this year that Mexican state-run Pemex expects to process more oil in 2016 as it resolves problems at refineries that forced crude runs to a record low in 2015. But demand for gasoline imports has grown by nearly a fifth over the past three years. Reuters noted that Mexico, with six major refineries, is forced to import more than half of its gasoline demand.
On Tuesday, TransCanada said the planned in-service date for the refined products transportation network will be based on discussions with contract shippers. The project news follows the company's June announcement that it had entered into a joint venture with IEnova to build, own and operate the $2.1-billion Sur de Texas-Tuxpan natural gas pipeline, also in Mexico.