Canada’s ATCO has agreed to transfer ownership of the unfinished gas pipeline to Mexico, which has been embroiled in a dispute with the Federal Electricity Commission (CFE), two officials told Reuters, in a sign of growing tensions in the energy sector.
Reuters reported in October that CFE was due to pay in 2021. ATCO about $100 million damages, interest and legal costs for the Ramal Tula gas pipeline in Hidalgo.
The pipeline deal would free ATCO from liability and give Mexican President Andrés Manuel López Obrador the opportunity to complete a stalled project that was designed to feed natural gas to a power plant north of Mexico City, the sources said.
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Three people familiar with the matter said the deal to hand over the project came after López Obrador met with Canadian Prime Minister Justin Trudeau in January, who used their talks to raise concerns about Canadian energy companies in Mexico.
López Obrador later met with representatives of Canadian energy companies, including ATCO, and details of the transfer were finalized in late February, one of the sources said. There was no payment in the transfertwo of them said.
The win-win deal stands in stark contrast to Lopez Obrador’s unsettled energy-policy talks, in which the United States and Canada clashed with Mexico.
ATCO said it would not disclose the terms of the agreement. “Together with CFE, we agreed that this is the best way to see the project complete,” he said in a statement. “ATCO remains committed to Mexico and its communities and will continue to own and operate its current power generation assets and modular construction business.”
Neither the CFE, nor the Government of Canada, nor López Obrador’s office responded to requests for comment.
Claiming that previous governments have skewed Mexico’s energy market in favor of private capital, López Obrador has taken a series of measures to increase state control over the sector.
However, US and Canadian companies allege that their measures put them at a disadvantage and violate the US trade agreement. In July, the US and Canadian governments began formal talks with Mexico to settle their energy disputes.
ATCO sought arbitration because after López Obrador took office in 2018, CFE canceled a contract the company had with the previous administration to build the pipeline, claiming work was unfinished, Reuters reported.
By that time, ATCO had already completed most of the 17 km pipeline. However, the Canadian company stated that it could not complete the last stage due to the resistance of local residents and referred to force majeure.
The company argued that Mexico had not done enough to complete the pipeline, sources said, and the London Court of International Arbitration agreed. Mexico paid in December 2021.according to people familiar with the matter.
The previous government of Mexico originally valued the Ramal Tula project at $66 million when the contract was awarded in 2014.
Source: Aristegui Noticias
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
