Corrected: US midstream developer WhiteWater in arbitration tangle with Mexico’s CFE

The story titled “US midstream developer WhiteWater in arbitration tangle with Mexico’s CFE” should have reported that CFE initiated an investigation against WhiteWater. A corrected version follows.

HOUSTON (ICIS)–Mexico’s state-run utility CFE and US midstream pipeline developer WhiteWater, a privately-run, Austin-based firm, are currently entangled in potential breach of contracts as both parties have headed into arbitration.

CFE said in a 17 July statement that it has initiated an investigation against WhiteWater and that a US gas pipeline capacity contract was “unnecessary for the purposes and needs of CFE.” The utility did not specify the type of investigation.

A WhiteWater spokesperson, when reached, declined to comment on specifics of CFE’s contracts with the company and how it related to the upcoming gas flows of the Whistler pipeline.

“CFE’s repeated false statements to the media about WhiteWater follow our initiation of arbitration against [CFE International] CFEi for unpaid amounts owed. Particularly disturbing are the explicit threats from the state-owned enterprise to pursue criminal action on contracts that it sought to renegotiate for months, leveraging its non-payment. WhiteWater will vigorously pursue its contractual rights in arbitration.”

WhiteWater also is one of the developers of the intrastate Whistler pipeline, built to deliver Waha gas in west Texas to Agua Dulce in south Texas for demand markets in Mexico, which is now online and poised to begin full operations by August.

Whistler is a 450-mile, 2 billion cubic feet (bcf)/day capacity pipeline that will interconnect with the Waha header near Coyanosa, Texas, in the Permian basin to a terminus near Agua Dulce, Texas.

The Whistler pipeline consortium includes WhiteWater Midstream, master limited partnership MPLX, and a joint venture between Stonepeak Infrastructure Partners and West Texas Gas.

The operational start of Whistler is understood not to be affected by the pending arbitration.

However, CFE’s move to begin an investigation against a major pipeline built and developed to deliver gas into Agua Dulce, which would connect to other pipelines, including the TransPecos pipeline, where CFE has capacity, heightens the political risk for US-Mexico gas trade flows.

INVESTIGATION

According to the 17 July statement by CFE, its investigation stems from contracts that were signed with WhiteWater between 2016 and 2017. According to the statement, the contracts included two natural gas supply deals that were signed between CFE International and WhiteWater, which CFE alleges had ties to former senior CFE officials.

Former CFE director Guillermo Turrent was CEO of CFE International between 2016 and 2018.

CFE said in the statement it would take legal action in Mexico and the US on the WhiteWater matter.

HISTORY

In June 2019 on the eve of the commissioning of the Sur de Texas-Tuxpan submarine pipeline, CFE threatened the builders of that pipe with arbitration.

During that three-month debacle, CFE claimed that the contracts with developers IEnova and TC Energia needed to be renegotiated.

CFE also separately faces arbitration that was initiated by US Goldman Sachs, reportedly for not paying the firm for a derivatives deal completed during the extreme Texas freeze in February 2021.