Transcanada to build, operate gas pipeline in Mexico

CALGARY – TransCanada Corp. plans to invest about $1 billion in a new natural gas pipeline in Mexico.

The Calgary-based pipeline giant announced Thursday that it has been awarded a contract to build, own and operate the pipeline by Mexico’s federal power company, the Comision Federal de Electricidad or CFE.

The 530-kilometre-long El Encino-to-Topolobampo pipeline will have a contracted capacity of 670 million cubic feet per day and is supported by a 25-year natural gas transportation services contract.

“Mexico’s government is engaged in a comprehensive plan to expand the nation’s electrical grid and generating capacity and much of that generation will be natural-gas fired,” TransCanada president and CEO Russ Girling said.

“This award is another example of TransCanada’s commitment to help develop Mexico’s energy infrastructure in a sustainable and cost-efficient manner.”

The Topolobampo pipeline begins in El Encino, in Chihuahua state, and terminates in Topolobampo, in Sinaloa state, interconnecting with other pipelines that are expected to be built as a result of separate bid processes by the CFE.

Girling said TransCanada is bidding on a number of CFE proposals.

With a flood of new oil coming from the Bakken shale-oil field in North Dakota, and fields like Colorado’s Niobrara and others pushing North American oil prices below international benchmarks, Suncor is trying to decide whether the cost of building an upgrader can be justified.

“Suncor was suggesting that when you have a lot of light oil you don’t need to go to the expense of making more synthetic light oil because it’s a limited market,” said Randy Ollenberger, an analyst at BMO Capital Markets.

“But they will have to make a decision at some point in time.”

Fort Hills, Joslyn and Voyageur are being weighed on their individual merits, and could theoretically be scrapped if they’re not found to be economically viable.

Williams says the focus will be on profitability and quality rather than on meeting stringent timelines.

It’s a view many in the oilsands have been adopting in recent years to avoid the major cost overruns the sector experienced before the recession caused expansions to come to a screeching halt.

In releasing its results late Wednesday, Suncor said it now expects to spend $6.65 billion this year, down from the $7.5 billion it predicted earlier.

Suncor owes the lower spending to its new Fire bag Stage 4 oilsands project, which came in 10 per cent under budget, as well as slowing the pace of the Total joint-venture developments.

Suncor isn’t the only oilpatch name to signal a more frugal approach these days. Talisman Energy Inc.’s new CEO, Hal Kvisle, said on a conference call earlier this week that 2013 spending will be about 25 per cent lower than this year, with much less of a focus on risky international exploration.

Wednesday night, Suncor announced third-quarter net earnings of $1.56 billion, or $1.01 per share, compared with $1.29 billion, or 82 cents per share, in the same 2011 period. The upswing was mainly due to exchange-rate fluctuations.

Operating earnings, a better gauge of the company’s underlying performance, fell to $1.3 billion, or 85 cents per share, compared with $1.79 billion, or $1.14 per share, a year earlier.

The earnings beat the average estimate of 78 cents per share, according to Thomson Reuters.

Suncor said the drop in operating earnings was due to higher share-based compensation expense, lower production volumes from offshore assets undergoing planned maintenance work and higher depreciation, depletion and amortization charges.

Revenues were $9.6 billion, down from $10.4 billion in the corresponding 2011 quarter.