Mexico Says it Wants to Review Major Pipeline Contracts

Published: Friday, June 28, 2019 - 5:24pm

This week Mexico’s energy utility notified Grupo Carso and an energy consortium of the companies IEnova and TC Energy that it wants to go into arbitration to nullify portions of their natural gas pipeline contracts. Carso is building a pipeline with 472 million cubic feet of daily capacity between Chihuahua and Sonora, according to a recent release. It said it is reviewing the request and its legal basis. 

“It has created this sort of climate of apprehension amongst the private sector to really go feet first into the Mexican market,” said Rick Margolin, a senior natural gas analyst for Genscape, which specializes in energy market data and analytics.

The announcements come near the completion of the Carso pipeline, and after gas had already started flowing in the other. Possible delays brought by the cases could exacerbate bottleneck issues in Texas and prolong dependence on more expensive alternatives among Mexican consumers, he says.

The government of President Andres Manuel Lopez Obrador, known widely as AMLO, has criticized a number of such pipeline deals dating to the previous administration as sweetheart deals for contractors.

However, Margolin said that, “On the surface all of these contracts appear to be by the book,” adding that they came out of “open and public” bidding processes.

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