TransCanada to build $1 billion pipeline in Mexico while being audited by Canadian regulators

TransCanada Corp. (TSX,NYSE:TRP) will invest about $1 billion in a new natural gas pipeline in Mexico after being granted a permit to contract to build, own and operate the duct by the country's federal power company, the Comision Federal de Electricidad or CFE.

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

Canada’s energy industry regulator, the National Energy Board (NEB), is auditing the pipeline giant. NEB published a letter Wednesday to TransCanada’s chief executive officer Russ Girling, saying it will review the firm’s integrity management program for virtually all the company’s pipelines, including the Canadian portion of the Keystone pipeline.

“The board expects TransCanada to demonstrate, and provide adequate supporting documentation of, the adequacy and effectiveness of its integrity management program,” the NEB stated.

The Calgary-based pipeline giant said the Topolobampo pipeline will begin in El Encino, in Chihuahua state, and end 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.

"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," said TransCanada president and CEO Russ Girling.

TransCanada operates a network of natural gas pipelines that covers over 68,500 kilometres and tap into virtually all key gas supply basins in North America. The firm is also developing one of North America’s largest oil delivery systems.