Sempra Energy to Build and Operate Arizona-to-Sonora Gas Pipeline for CFE

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The contract to build and operate a 530-kilometer natural gas pipeline, which will connect gas supplies from Arizona to Guaymas, Sonora, in the northwest of Mexico, has been awarded to Sempra Energy (NYSE:SRE) (San Diego, California) by the state-owned Comision Federal de Electricidad (CFE) (Mexico City, Mexico).

The build-and-operate contract will cover a period of 25 years. The pipeline will be built in two phases, with the first to be complete in October 2014 and the second by July 2015. Once the two phases are completed, the pipeline will have a capacity of 760 million cubic feet per day. Investment in the project will be between $630 million and $730 million, according to a presentation by state-owned oil producer Petroleos Mexicano in September.

With imported gas prices at the lowest levels since 2001 in New York, Mexico is expanding its 9,600-kilometer gas network by 40% to cope with record imports. Some pipelines are running at 95% capacity, which has caused bottlenecking, leading to shortages in some regions.

Sempra's offer of $0.13 per million British thermal unit defeated bids from competing companies such as TransCanada Corporation, Korea Gas Corporation and Mitsui & Company.

CFE operates in the generation, transmission and distribution of electric power. The vertically integrated company distributes power to 35 million clients, representing 100 million residents, through a transmission and distribution network stretching to more than 752,000 kilometers. CFE is also a decentralized government agency responsible for the development, construction, operation and maintenance of Mexico's electricity system.

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