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Canadian natural gas company TC Energy has forged a strategic alliance with Comisión Federal de Electricidad (CFE), Mexico’s state-owned electric utility, to develop a $4.5bn natural gas pipeline.

The Southeast Gateway Pipeline is intended to supply natural gas to Mexico’s central and southeast regions.

The two firms have reached a final investment decision to proceed with the construction of the 715km-long offshore pipeline project, which is expected to have a capacity of 1.3 billion cubic feet per day.

Planned to be commissioned by mid-2025, the pipeline will originate onshore in Tuxpan, Veracruz, then continue offshore, prior to making landfall at Coatzacoalcos, Veracruz, and Dos Bocas, Tabasco.

TC Energy president and CEO François Poirier said: “The Southeast Gateway Pipeline will be TC Energy’s second marine natural gas pipeline in Mexico, connecting to the coastal regions of Veracruz and Tabasco, and is another prime example of our ability to originate world-class projects that offer incremental growth to our long-term outlook.”

As part of the alliance, TC Energy and CFE will consolidate existing assets that have been disputed between the two parties.

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These assets include the Tamazunchale, Tula-Villa de Reyes (TVDR), and Tuxpan-Tula (TXTL) pipelines.

The assets will be consolidated under a US dollar-denominated take-or-pay transportation service agreement (TSA), which will be extended through to 2055.

TC Energy said that the new TSA will be governing associated new infrastructure projects, which will be developed together with the Mexican electric utility.

TC Energy and CFE agreed to end their currently suspended international arbitrations related to the TVDR and TXTL pipelines.

In exchange, TC Energy will earn a return on the capital it invested in the assets.