UPDATE 1-TransCanada wins contract for $1 bln pipeline in Mexico

Thu Nov 1, 2012 7:50am EDT

Nov 1 (Reuters) - TransCanada Corp said on Thursday its Mexican subsidiary has been awarded a contract to build, own and operate the El Encino-to-Topolobampo Pipeline by CFE, Mexico's federal power company.

The Canadian pipeline operator expects to invest about $1 billion in the project, which is supported by a 25-year natural gas transportation service contract with the Comision Federal de Electricidad.

The pipeline will be about 530 km (329 miles) long and have contracted capacity of 670 million cubic feet per day. It is anticipated the project will be in service in the third quarter of 2016, the company said.

TransCanada said the pipeline is being driven by Mexico's plan to expand its electrical grid and generating capacity, much of which will be derived from natural gas-fired power plants.

The company, Canada's largest pipeline company, operates the Keystone pipeline that has the capacity to transport a quarter of Canada's crude oil exports to the United States.

It is also at the centre of the contentious Keystone XL project, between Alberta and southern Nebraska. That project still awaits U.S. federal approval after President Barack Obama rejected the initial application early this year.

The Topolobampo pipeline will begin in El Encino, in the state of Chihuahua, and terminate in Topolobampo, in the state of Sinaloa, interconnecting with other pipelines set to be built as a result of separate bid processes, the company said.

"This project is a response to a CFE invitation to bid. As Mexico makes the transition from fuel oil to cleaner-burning natural gas, there will be additional opportunities for TransCanada," said Russ Girling, TransCanada's chief executive in a statement.

TransCanada said it has already built and is operating the Guadalajara and Tamazunchale pipelines and it will soon break ground on a Tamazunchale pipeline extension.

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