The South Texas Pipeline transported approximately 15% of Mexico‘s total natural gas imports through pipelines in 2021.
This offshore pipeline transports natural gas from Texas to energy and industrial markets in central and eastern Mexico.
TC Energy owns a 60% stake and is the operator of the pipeline.
The 478-mile (770 km) offshore pipeline transports natural gas from the US border near Brownsville, Texas, to Mexican power plants in Altamira, Tamaulipas, and Tuxpan, Veracruz, where it interconnects with the Tamazunchale pipelines and Tula and other third-party gas pipelines.
Revenues of TC Energy
For more than a decade, Mexico has been undergoing a significant transition from fuel oil and diesel as its main energy sources for electricity generation to the use of natural gas.
As a result, new pipeline infrastructure has been and continues to be required to meet the growing demand for natural gas.
The Federal Electricity Commission (CFE), Mexico’s state-owned power company, is the counterparty to all of TC Energy’s existing pipelines under long-term contracts, which are predominantly denominated in US dollars.
South Texas Pipeline
These fixed rate contracts are generally designed to recover the cost of the service and provide a return on invested capital.
As the developer and operator of the pipeline, companies like TC Energy generally bear the risk of construction and operating costs and penalties for service delays, excluding force majeure events that provide schedule relief.
Gas pipelines in Mexico have tariffs, services and related fees approved for other potential users.
TC Energy’s Natural Gas Pipelines in Mexico segment consists primarily of the company’s investments in 2,503 km (1,554 miles) of regulated natural gas pipelines currently in operation.
Mexico Natural Gas Pipelines segmented earnings in 2021 decreased Can$112 million compared to 2020 and increased Can$179 million in 2020 compared to 2019.
A weaker US dollar in 2021 had a negative impact on the Canadian dollar equivalent segmented earnings of the company’s operations in Mexico compared to the same period in 2020, while a stronger US dollar in 2020 had a positive impact on Canadian dollar equivalent segmented earnings from its operations in Mexico compared to the same period in 2019.