TC Energy reduces capex for Southeast Gateway pipeline in Mexico, eyes early start of service

Canadian midstream company TC Energy has reduced its capital expenditure forecast for its Southeast Gateway pipeline in Mexico by 11% and may start commercial operations at the project earlier than planned.

The 715km pipeline, which was originally costed at US$4.5 billion, will now come in at between US$3.9bn to US$4.1bn, François Poirier, President and CEO of the Calgary-based company, said on a Q3 earnings call Thursday.

The mainly underwater pipeline in the Gulf of Mexico will supply up to 1.3 billion cubic feet per day of natural gas to Mexico's energy-starved southeastern region.

TC Energy and Mexico's state-owned utility CFE began developing the pipeline in 2022. 

Natural gas from the Southeast Gateway will serve power plants that CFE is constructing in southeastern Mexico.

Start of service

TC Energy said it is meeting with CFE regularly to discuss a possible early start of service. CFE has a 13% share in the project, Poirier said.

Under its contract with CFE, the Southeast Gateway is due to begin commercial operations no later than mid-2025.

"If we can improve upon that, we will," Stanley Chapman, TC Energy's head of natural gas pipelines, told the call.

All major onshore facilities for the Southeast Gateway have now been completed,  including both compressor stations.

The deep water part of the pipeline is completed and the remaining shallow water pipe installation will be finished in Q4.

Mainly as a result of savings at the Southeast Gateway, TC Energy cut its total capital spending forecast for 2024 by 8% to US$7.4bn.

More plans for Mexico

TC Energy's plans for Mexico will not end when the Southeast Gateway is completed and operating.

“We see additional growth opportunities in-country once the backbone of the infrastructure is built… adding fingers and toes to that infrastructure,” Poirier said.

TC Energy aims to find a partner for its Mexican operations in the second half of 2025 or the first half of 2026, Poirier said.

The company will provide more detai about its plans at an investor day on November 19.