MEXICO CITY -- Canada ATCO Ltd has agreed to transfer ownership of an unfinished pipeline to Mexico, a dispute with the Mexican state power company, two officials told Reuters.com, a rare breakthrough in ongoing tensions over energy.
In October, Reuters reported that the Mexican power utility Commissionon Federal De Electricidad CFE had to pay $100 million in damages, interest and legal fees over the Ramal Tula natural gas pipeline in the central state of Hidalgo in 2021.
The deal to hand over the pipeline will free ATCO from its liabilities and give Mexican President Andres Manuel Lopez Obrador the chance to finish the project, which was designed to supply natural gas to a power station north of Mexico City, the sources said.
Three people familiar with the matter said after Lopez Obrador met with Canadian Prime Minister Justin Trudeau in January, the agreement to hand over the project was reached.
Lopez Obrador met representatives from Canadian energy companies, including ATCO. Details of the transfer were concluded in late February, according to one of the sources. Two of the sources said there was no fee involved in the transfer.
The mutually beneficial agreement contrasts with the unresolved dispute settlement talks centering on Lopez Obrador's energy policies that have pitted the U.S. and Canada against Mexico.
Neither ATCO, CFE, the Canadian government or Lopez Obrador's office responded immediately to requests for comment.
Lopez Obrador has taken a series of steps in order to bolster state control of the sector, despite the fact that past governments skewed Mexico's energy market in favor of private capital.
U.S. and Canadian companies argue that his measures put them at a disadvantage and are in violation of a North American trade deal. In July, the U.S. and Canadian governments launched formal dispute resolution talks with Mexico over energy.
ATCO went to arbitration because after Lopez Obrador took power in 2018, CFE canceled a contract the Calgary-based company made with the last administration to build the pipeline, on the grounds that the work was incomplete, Reuters reported.
ATCO had already completed most of the 17 kilometer 11 mile pipeline by the end of the day. The company said that it could not complete the final stretch due to resistance by local communities, and therefore invoked force majeure.
The London Court of International Arbitration agreed with the company's argument that Mexico had not done enough to enable the completion of the pipeline, as stated by the London Court of International Arbitration. Mexico paid up in December 2021, according to people familiar with the matter.
When the contract was awarded in 2014, Mexico's prior government initially valued the Ramal Tula project at $66 million.