SRE Sempra

MEXICO CITY—TransCanada Corp. and the Mexican unit of Sempra Energy on Monday won a contract to build a 500-mile offshore pipeline to carry natural gas from South Texas to northeastern Mexico.

Infraestructura Marina del Golfo, which is 60% owned by TransCanada and 40% by Infraestructura Energé tica Nova SAB, bid $2.1 billion to build, own and operate the pipeline from Brownsville, Texas, to the Mexican Gulf port of Tuxpan.

The line will run under the Gulf of Mexico with capacity to transport 2.6 billion cubic feet a day of natural gas. It will supply power plants of Mexican state electric utility Comisió n Federal de Electricidad, or CFE, under a 25-year service contract. The CFE said the transport tariff offered was among the most competitive globally.

"The South Texas-Tuxpan gas pipeline will contribute to CFE's strategy of replacing expensive and polluting fuels such as fuel oil and diesel in generating electricity," the utility said.

The bid was the only one for the project, and was well below the $3.1 billion cost that the CFE had initially estimated. An earlier second bidder, Ducto Mar Gas, had been disqualified as it had no offshore construction experience and failed to meet financial guarantees, the CFE said.

TransCanada operates two natural gas pipeline systems in Mexico and is building two more that are expected to go into operation late this year. With Monday's project award and others won recently, the company has assets and projects under development in Mexico of around $5 billion.

"We are extremely pleased to further our growth plans in Mexico with one of the most important natural gas infrastructure projects for that country's future," TransCanada President and Chief Executive Russ Girling said in a statement.

TransCanada was among the first private companies to build natural gas pipelines in Mexico in the mid-1990s when transport and distribution of the fuel were opened to the private sector.

Sempra unit IEnova operates gas pipelines, a liquefied natural gas terminal, natural gas distribution systems and power generation plants.

With the natural gas pipelines promoted by the CFE and state oil company Petró leos Mexicanos, Mexico's aim is to increase its pipeline network by 75% between 2012 and 2018.

The expansion began after Mexico missed out on benefits of the U.S. shale gas boom that lowered prices of the fuel in North America. The lack of pipeline infrastructure in 2012 and early 2013 meant Mexico was unable to take advantage of the lower prices, and was forced on numerous occasions to cut gas supplies to the industry.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

June 13, 2016 16:35 ET (20:35 GMT)

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