Mexico could use US$3.9bn pipeline to store natural gas, as trade tensions mount

Mexico could use the recently completed US$3.9bn Southeast Gateway pipeline in the Gulf of Mexico to store natural gas, amid growing trade tensions with the US, pipeline operator TC Energy said on Friday.

The mainly underwater 715km Southeast Gateway was completed on January 20.

Mexico's state-owned utility CFE has not finished construction of two combined-cycle gas turbine power plants that the pipeline will supply.

As an alternative, CFE and Mexican authorities have discussed with TC Energy the possibility of using the pipeline to store natural gas, TC Energy's head of natural gas pipelines Stan Chapman said on a Q4 conference call.

"Given the limited amount of storage capacity across Mexico and in order to provide some level of utility upon in-service, we've been discussing with CFE the potential to use the completed... pipeline for parking mode or storage service," Chapman said.

The Mexican government wants to increase the country's storage capacity, which currently stands at less than three days of its natural gas demand.

Mexico relies on the US for around 70% of its natural gas needs. The government is concerned that with Donald Trump in the White House and threatening tariffs, gas supply from the US may be interrupted.

US$3.9bn project

Calgary-based TC Energy aims to put the pipeline into service on May 1.

The final cost for the Southeast Gateway project was US$3.9bn, 13% less than TC Energy's original estimate of US$4.5bn.

The pipeline will supply up to 1.3Bf³/d (billion cubic feet per day) of natural gas to Mexico's energy-starved southeastern states.

CFE's 565MW plant in Mérida on the Yucatán peninsula will begin operation in Q4. A nearby 1.1GW plant in Valladolid will only start service in 2027, when Engie completes the extension of the Mayakán natural gas pipeline.

As well as discussing storage, CFE is talking with TC Energy and other companies about building shorter pipelines from the Southeast Gateway to the national pipeline network managed by state body Cenagas, Chapman said.

Mexico IPO

François Poirier, CEO of TC Energy, told the call that by the end of this year he expected gas to be flowing on the US$400mn, 110km south section of the Villa de Reyes pipeline in central Mexico.

Once TC Energy's pipeline projects in Mexico are complete and natural gas is flowing, Poirier said the company would look to sell a stake in its Mexican business.

“We'll be considering both capital market solutions, an IPO of sorts, as well as a minority interest sale to a buyer," Poirier told the call.

A transaction will take place in the first half of 2026, he said.

TC Energy is also planning "some Mexico-level or perhaps even asset-level financing to help reduce our equity capital at risk in Mexico."