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Mexico sees $4.5 bln in savings from pipeline contracts renegotiation deal

Credit: REUTERS/Edgard Garrido

Mexico said on Tuesday a deal had been struck with a group of companies to renegotiate the terms of natural gas pipeline contracts signed under the previous administration that will save the government $4.5 billion.

Updates with details, president

MEXICO CITY, Aug 27 (Reuters) - Mexico said on Tuesday a deal had been struck with a group of companies to renegotiate the terms of natural gas pipeline contracts signed under the previous administration that will save the government $4.5 billion.

The deal announced by President Andres Manuel Lopez Obrador and the head of the Federal Electricity Commission (CFE), a state-run power utility, will reduce what Mexico pays the firms to transport natural gas.

The dispute has caused diplomatic frictions with Canada in particular, aggravating concerns that Lopez Obrador, a veteran leftist who took office in December, could call into question any contracts signed before he assumed the presidency.

Among the most prominent companies involved in the dispute are Canada's TC Energy Corp, Mexico's Grupo Carso, an infrastructure firm controlled by billionaire Carlos Slim, and IEnova, a Mexican unit of U.S. company Sempra Energy.

The CFE pushed the renegotiation of the contracts issued under the previous government, arguing the terms were unfair.

CFE head Manuel Bartlett said the $4.5 billion savings foreseen in the renegotiation should be seen against a cost to the utility of $12 billion under the original contracts.

(Reporting by Dave Graham Editing by Paul Simao)

((dave.graham@thomsonreuters.com; +52 55 5282 7146; Reuters Messaging: dave.graham.thomsonreuters.com@reuters.net))

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