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Mexico, Guatemala, Honduras, El Salvador envision gas pipeline to bolster economic development

Highlights

Pipeline could allow Texas gas to flow as far south as Honduras

Access to gas would allow Central America to switch away from fuel oil, coal

Program includes a new LNG terminal on Honduras' Caribbean coast.

Governments also evaluate connecting Mexico's power grid with Central America

Mexico City — Building a natural gas pipeline is at the heart of a development program for southern Mexico, Honduras, El Salvador and Guatemala, the United Nations Economic Commission for Latin America and the Caribbean said Monday.

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"Energy integration will be the strongest component of the plan," said Alicia Barcena Ibarra, UNECLAC's executive secretary, in a webcast event from Mexico's Presidential Palace.

The pipeline will start in Salina Cruz in southern Mexico, traversing south to Guatemala's Pacific coastline, continuing on to El Salvador, before turning north to San Pedro Sula on Honduras' Caribbean coast.

"The surplus of natural gas being produced in, for example, Texas can supply these countries," she added.

The four countries requested the commission formulate a development program for the region on December 1, the day Mexican President Andres Manuel Lopez Obrador took power.

The plan's goal is to promote economic and social development, curbing regional emigration into the US, which is a major part of Lopez Obrador's foreign policy agenda.

The pipeline will give 33 million people access to cleaner energy, reducing their production costs and boosting industrial development, Barcena said.

The development program also includes the construction of an LNG terminal and a 300-MW power plant in Puerto Cortes in Honduras' Caribbean coast.

COUNTRIES SEEK FUNDING

This is not the first time Central America has envisioned a gas pipeline with Mexico. In 1996, countries in the region requested UNECLAC study the feasibility of such a project.

In 2015, Mexico signed an agreement with Guatemala and Honduras to build a gas corridor with an expected cost of $800 million. However, the project was never developed.

The project was envisioned to help the region switch away from fuel oil, diesel and coal use for power generation.

The program also envisions an expansion of the Tapachula-Los Brillantes transmission line, which connects Mexico with Guatemala, further into Central America, Barcena said.

The first expansion is to connect Los Brillantes with central Guatemala, and the second is to connect Los Brillantes with the Central American transmission network that runs from Aguacapa in southern Guatemala to Panama.

The project would allow power generated in Mexico to flow through Central America. The combined cost of both expansions is $465 million, said Barcena.

Mexico, Honduras, El Salvador, and Guatemala support the development of the program and now will focus on securing its funding, Marcelo Ebrard Casaubon, Mexico's foreign secretary, said at the event.

"What we have now is an action route, which we have to implement in the coming years to change our social and economic reality," he added.

According to Ebrad, the US, Canada, Chile, Turkey, Japan and the European Union are interested in supporting the program.

-- Daniel Rodriguez, daniel.rodriguez@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com