Pipe down

The Mexican government plans to revoke Sempra's Texas-Tuxpan pipeline permit.

The Mexican government is planning to revoke the permit for the construction of the Texas-Tuxpan 689km gas pipeline, currently held by the IEnova-TEC Energy consortium.

The Ministry of Communications and Transport (SCT) argued that the consortium failed to pay the annual guarantee to the government which amounts to a 7.5% payment of the total amount for the project, in which the consortium has already invested USD 2.6 billion.

The General Counsel of a rival energy firm commented, “This has received relatively little attention because there is no real intention to cancel the concession, it is just a manoeuvre by the SCT. What it does highlight is that there is not adequate monitoring from either side.”

“This has received relatively little attention because there is no real intention to cancel the concession.”

General Counsel, energy firm, Mexico

Having said that, the Mexican government has already revoked three public tenders including a brewery in Baja California, a new airport in Texcoco and a metro line in La Laguna. However, none of them had the strategic nature of the Texas-Tuxpan gas pipeline which already transports 26% of the gas imported to Mexico from the US.

A senior executive in the energy industry in Mexico does not believe this will amount to anything, “These kinds of reprimands are just to pressure companies. It’s also worth noting that the SCT is being restructured at the moment so everything is being audited. There is also a trust issue between the Secretary and the officials who have been imposed on him.”

“These kinds of reprimands are just to pressure companies. It’s also worth noting that the SCT is being restructured at the moment so everything is being audited.”

Senior executive, energy firm, Mexico

A lawyer familiar with the concession was in agreement, “The concession expires soon, so the negotiation mechanisms for the renewal should already be in place. These reprimands help the SCT to strengthen its position but they do not put the project at risk. Furthermore, the gas pipeline is strategic for the Mexican government, they can’t afford to risk it. We all know the dynamics, both parties know each other’s potential moves, it is just a matter of finding some common ground.”

Both TC Energy and Sempra, of which IEnova is a subsidiary, are yet to comment on the threat of revocation and its potential impact on their ongoing operations in Mexico. In early February 2021, Jeffrey Martin, CEO of Sempra affirmed that the company continued to work hand in hand with the government as President López Obrador (AMLO) had committed to maintain fiscal discipline. Martin also said that a potential energy reform would affect the company’s business in the country but added that it would find a manageable solution and that the company remained committed to making AMLO’s administration successful.

It’s also worth remembering that the June elections are approaching and part of AMLO’s campaign strategy is to show that the government is intolerant of mistakes.

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