TransCanada finds warmer welcome in Mexico for pipeline business

The tropical heat of Mexico is a welcome break forCanadian snowbirdslooking to escape a freezingwinter.

For Russ Girling,the country is also providing a getawayfrom all the punches and kicks he's taken trying to buildpipelines in Canada and the United States.

At home,the CEO ofTransCanadaspends billions of dollars, waits several years, and still doesn't know when the company can install new pipes in the ground.

Meanwhile, the environmental opposition is such thateven Girling'sown mother has called him in recent yearsto ask "Russ, are you going to blow up the planet?"

We foresee there will be more opportunities on the horizon in Mexico.Russ Girling, TransCanada CEO

Down in Mexico, well,life is much easier.

The regulatory oversight and environmental opposition is a fraction of what it is in Canada and the United States for a company looking to construct new pipelines.

Mexico is proving to be a low-risk, high-reward business venture at a time when the pipeline company is struggling to construct new projects elsewhere in North America and experiencing, in Girling's words, "a lot of scrapes and bruises" along the way.

Lower costs, fast results

Girling painted a picture at the company's recent annual general meeting in Calgary about how much cheaper and simpler the processof approving a pipeline is in Mexico. In that country, it costs TransCanada about $5 million to bid on a project. Compare that to the $2.5 billion US the company spent on Keystone XL in the U.S. and the $700 million it has already invested in the Energy East project in Canada.

In addition, if TransCanada'sbid in Mexico issuccessful, the company receives its permits, begins working with landowners and construction begins "right away."

The Keystone XL oil pipeline proposal took seven years before a decision was made. The project is shelved in the U.S. after President Barack Obamadenied a permit. Without a permit, the company launched alawsuit and a multibillion-dollar North American Free Trade Agreementclaim to try to recoup its losses.

With Energy East,there is no certainty the national regulator and the federal government will ultimately grant a permit.

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"Clearly, what we have found is the risk that we need to take in Mexico to participate in a large-scale infrastructure investment is far less," said Girling.

Smaller projects

While the regulatory road is much easier to travel for TransCanada, the reward for each projectis not as large, sincethe projects in Mexico are much smaller than those proposed elsewhere in North America.

Four natural gas projects in the works in Mexico have a value of $2.5 billion. Meanwhile, the Energy East oil pipeline in Canada would cost $15.7 billion, and a pair of natural gas pipelines in British Columbia to serve new liquefied natural gas export facilities are estimated at $9.8 billion.

The payoff will come as the pipelines keep adding up.TransCanadahas a total of six projects in Mexico two operating, three under constructionand one under development.

"Mexico has been a very good place for us to do business," said Girling. "I have a very positive long-term view of the growth of Mexico and its position in North America."

Girling points to the country's expanding population,increasing energy consumption andideal geographical location as an exporter.

"We foresee there will be more opportunities on the horizon in Mexico," he said.

TransCanada first entered the countryin the mid-1990s, when the company constructed a pair of pipelines.

Little environmental opposition

Operating in Mexico also provides much less opposition from environmentalists. who have targeted pipeline companies as a way of restricting growth of oil production.

The Keystone XL project in particular drew criticism, even from celebrities likeRobert Redford.

But down in Mexico? The stiff opposition from environmentalists, politicians and regulators just doesn't exist.

No wonder TransCanadais enjoying its time in the tropics.