Corruption in Mexico leads to loss of two pipeline projects

Fuel Fix:

Citing numerous delays, runaway costs and alleged acts of extortion, the Canadian pipeline company TransCanada has halted construction along the routes of two natural gas pipeline projects in Central Mexico that are worth more than $1 billion combined.

TransCanada stopped construction in the state of Hidalgo on the Tuxpan-Tula Pipeline and the Tula-Villa de Reyes Pipeline, the company's Mexican subsidiary said in an open letter published in several Mexican newspapers.

"The social and legal uncertainty that prevails in this state makes the continuity of our investments impossible," the company wrote in the statement. "On multiple occasions, social groups have made irrational requests that border on extortion and have performed acts outside the law."

TransCanada won contracts with Mexico's state-owned power company to build the two pipelines as part of that nation's historic energy reforms. The company received a $500 million contract in Nov. 2015 to build the 163-mile Tuxpan-Tula Pipeline to move natural gas from the coastal state of Veracruz to power plants in Hidalgo. Several months later, the company received an April 2016 contract worth $550 million to build a pipeline to move natural gas from Tula to the State of San Luis Potosi.

As part of larger network to move natural gas from South Texas into the Mexican interior, the two pipelines were originally planned to be in service this year, moving up to 886 million cubic feet of natural gas per day. But with routes going through rugged mountain terrain, the projects have encountered strong opposition and legal challenges from farmers and indigenous people citing landowner rights issues as well as environmental and safety concerns.

TransCanada's situation in Hidalgo follows opposition to pipeline projects raised by indigenous groups in the United States, Canada and elsewhere in Mexico. Last year, members of the Yaqui tribe in Mexican border state of Sonora dug up a small section of a natural gas pipeline being built San Diego-based Sempra Energy on their land.

TransCanada faces other challenges in Hidalgo beyond landowner opposition. The company reported that is also facing legal uncertainty and higher than expected costs in obtaining permits from various municipalities.

Exact figures were not disclosed but the company reported in its statement that it has experienced "significant delays" and "multimillion losses" in the state of Hidalgo.
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Corruption and extortion appear to be part of the culture of Mexico and then there are the cartels.  It is why Mexico has not been able to exploit the Eagle Ford formation which stretches from Texas into Mexico.  The culture of corruption benefits the few at the top but harms the rest of the country.   It is surprising that TransCanada did not realize that going in.