Page 5 - NorthAmOil Week 34

NorthAmOil COMMENTARY NorthAmOil
New possibility
But there may be a solution in sight.
e Wall Street Journal reported on August
26 that the government had struck a prelimi- nary deal with four of the companies involved in building Sur de Texas-Tuxpan and the other pipelines. Sources close to the talks said that bil- lionaire Carlos Slim – the owner of Grupo Carso, one of two Mexican rms involved in the gas pipeline projects targeted by CFE – had helped to broker a deal.
According to the newspaper, Slim suggested that the national power provider pay for the gas it was set to receive via Sur de Texas-Tuxpan at a at rate, rather than following a schedule under which payments would start out low and grow higher every year for a period of 20 years. e plan could save CFE up to $600mn over the life of the contract. At the same time, it would remove roadblocks to the construction of pipe- lines that would push Mexico’s total gas trans- portation capacity up by 40%. Additionally, it would give Permian and Eagle Ford shale oper- ators new options for disposing of gas from their oil deposits.
is breakthrough would come at a price – namely, CFE’s obligation to pay more that it had previously anticipated for US-produced gas over the rst 10 years of the deal. Even so, the power provider would not lose out in the long term,
since its payments would be lower than expected during the following 10 years.
Another step to the left
But this arrangement will only work if CFE and the Mexican government uphold it.
e power provider’s campaign against the companies seeking to build the gas pipelines owes a great deal to the le ist politics and popu- list style of Andres Manuel Lopez Obrador, the current president of Mexico. Lopez Obrador has sought to reverse the energy and scal reforms enacted by his predecessor, Enrique Pena Nieto, and he has criticised private-sector investments by people such as Carlos Slim and companies such as TC Energy.
In the event that the president’s successors share Lopez Obrador’s outlook (or lean even further to the le ), they may make another bid to change the terms of the contracts for Sur de Texas-Tuxpan and other pipelines. ey may even see this as their best option, given that they will probably want to lower the set fee they are obliged to pay under Slim’s plan.
Before that can happen, though, the par- ties have to strike an agreement in the rst place. ey do appear to be close to doing so, and Lopez Obrador told the press recently that he might make the deal public as soon as August 27.™
Lopez Obrador has sought to reverse the energy and scal reforms enacted by his predecessor, Enrique Peña Nieto.
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