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Mexico's CFE resolves natural gas pipeline contract dispute

Bogota — Mexico's government has reached an agreement with gas transportation companies Grupo Carso SAB, Sempra Energy Mexico unit IEnova and Canada's TC Energy, settling a dispute that threatened to derail industry confidence.

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The deal between the companies and the country's Federal Electricity Commission, or CFE, will save the commission $4.5 billion against implied costs of $12 billion under the initial contracts, Mexico's president, Andres Manuel Lopez Obrador, said at a press conference Tuesday morning.

"We called on businesspeople to seek an agreement," Lopez Obrador said. "We have to thank the willingness of businessmen to reach an agreement, putting forward the national interest and also considering the legitimate interest of companies."

IEnova and TC Energy's $2.5 billion Sur de Texas Tuxpan pipeline will be the first to start operating, delivering 2.6 MMcf/d of gas, CFE head Manuel Bartlett said during the press conference, though he did not say when that would be.

The Sur de Texas-Tuxpan pipeline is expected to boost Mexico's gas import capacity by 40%, serving demand on Mexico's southern Yucatan peninsula.

Lopez Obrador singled out Grupo Carso, owned by business magnate Carlos Slim, for praise for being the first to come to the table.

The dispute was triggered last month when Mexico's leftist government called the contracts "exorbitant," worrying business groups that the government would renege on contracts finalized during the administration of Lopez Obrador's predecessor, the more business-friendly Enrique Pena Nieto, who left office in 2018.

The Mexican government took issue with the "take-or-pay" nature of the contracts, which would have obligated CFE to cover the cost of undelivered natural gas.

Bartlett, who had previously threatened the companies with arbitration proceedings for at least $3 billion, said the new terms were "reasonable and fair" on announcement of the deal Tuesday morning.

The head of Mexico's biggest business lobby, CCE, described the deal as a "win-win."

-- Joe Parkin Daniels,

-- Edited by Bill Montgomery,