TC Energy optimistic about growth in Mexico but remains cautious

TC Energy, a key player in the energy sector, sees significant potential in the Mexican gas market thanks to growing demand and liquefied natural gas (LNG) export projects.
However, the Canadian company remains cautious, limiting its financial exposure to Mexico to around 15% of its consolidated EBITDA.
The support of the Mexican government, under the presidency of Claudia Sheinbaum Pardo, reinforces this balanced approach.

Growth Potential and Energy Demand

François Poirier, President and CEO of TC Energy, expresses confidence in the Mexican market on Q2 2024 earnings call.
Mexico imports an average of 6.2 Bcf/d of gas from the USA via pipelines, with total demand of 7.9 Bcf/d.
Local production amounts to 2.6 Bcf/d, creating a substantial import requirement to meet domestic demand.
Gas requirements for power generation (4 Bcf/d), industry (1.8 Bcf/d) and Pemex’s upstream operations (1.9 Bcf/d) underline the importance of this market.
Recent LNG projects could further increase import requirements, although their realization remains uncertain, except for the advanced Altamira project by New Fortress Energy.

Prudent Approach and Strategic Partnerships

Despite these promising prospects, TC Energy is taking a cautious approach.
Before making new investments, the company seeks to establish partnerships or accelerate the growth of its other franchises.
This strategy aims to maintain controlled exposure despite the Mexican government’s policies of support for natural gas transmission.
Claudia Sheinbaum Pardo, the company’s president-elect, emphasized the importance of natural gas in achieving the country’s socio-economic goals.
This strengthens TC Energy’s strategic position, but any new project will require rigorous evaluation and the search for strategic partners to limit financial risks.

Progress of the Southeast Gateway Project

TC Energy’s flagship Southeast Gateway project is progressing well.
This 715 km pipeline, with a capacity of 1.3 Bcf/d, is scheduled to enter service in 2025.
It complements the existing pipeline from Valley Crossing to Tuxpan and will connect to the new port of Dos Bocas, facilitating gas supply to the Mexican government’s new refinery.
The offshore section of the pipeline is nearing completion, with only 3 km of shallow water pipeline remaining.
TC Energy is focused on completing this project on time and on budget, with an emphasis on safety and efficiency.
TC Energy continues to see Mexico as a key market for natural gas growth in North America.
The company balances its optimism with a cautious approach, aiming to secure strategic partnerships and maintain a controlled financial exposure.
The Southeast Gateway project illustrates this balance, promising to strengthen Mexico’s energy infrastructure while ensuring profits for TC Energy.
The project’s progress and government support are positive indicators for the future, but caution remains the watchword in the face of economic and political uncertainties.