TransCanada Pipelines: Operating in Mexico Harvard Case Solution & Analysis

TransCanada Pipelines: Operating in Mexico Case Solution

History of TransCanada

What Is TransCanada?

            TransCanada is a leading North American company, which operates in the energy and gas sector of America and Canada. The company is headquartered in Canada. The company works in infrastructure and operates its business in North America. (TransCanada, 2016)

How TransCanada Started its Business

In 1950s, the population of Canada was growing rapidly and energy shortage was becoming a major issue for the public of the region. At that time TransCanada Pipeline Ltd entered the market to solve this problem and to build a natural gas pipeline in 1951. However, the initial investment was split up in a 50-50 ratio between the Canadian and American investors for the sake of their own interests.

            Initially, two major candidates decided to providethe gas within the Canadian route. These applicants include the Canadian Delhi Oil Company (TCPL) and another huge company known as Western Pipeline. However, these companies suggested to move the gas throughout the whole Canadian region through major cities of the country. On the other hand,in 1954, C D Howe forced these companies to enter in the major American segments as well.

            In addition, this step encountered another problem for these firms that the major supply of gas to major cities of Canada was seen as a threat for the American public. Furthermore, the politicians raised this issue in the parliament and proposed that this pipeline was serving more Canadian customers as compared to American and therefore, it should be laid in the Canadian soil. As a solution TCPL constructed an entirely new gas pipeline to serve the Canadian public and showed a nationalist sentiment and solved this political issue.

            The regulations for TCPL were strict due to political pressures however, the firm’s proposal to export gas towards external regions was approved after being rejected twice in 1953. Firstly, the company welcomed explorers to extract natural gas and to prove that reserves are enough to fulfil the needs for next thirty years for Canada. (TransCanada, VIsion and Strategy , 2016)

On the other hand,the permission to export gas to other states was granted only for one condition that the company will fulfill the local needs and then export it to other provinces. Finally, TCPL merged with Western pipeline to expand its business and to enter in the energy sector. However, there was a big question ahead for the company as tohow will it raise money to fund its projects.

TransCanada Current Position in Mexico

            As it can be seen form the above discussion, the company is committed to expand its business into being more profitable and potential segments and regions. Keeping this in mind, the company entered into the Mexican market and invested a lot of capital towards this region. There are several project in this region which are under construction. These projects, known as the El Encino – Topolobampo Pipeline and the El Oro – Mazatlán Pipeline, are both expected to be in service in 2016.

In addition, these pipelines will connect major demanding centers which are nearby the pacific coast of Mexico. The total capital which is employed on these projects is nearly US $ 2.6 billion. (TransCanada, Customer Express , 2016)

Oil and Gas Sector of Mexico Yesterday and Today

Mexico’s petroleum industry is known as the world’s eleventh largest petroleum industry. However, Mexico has ranked at number thirteen in terms of net exports. On the other hand,it has the seventeenth largest oil reserves in the world. Moreover, it is the fourth largest oil producer in the Western Hemisphere behind the United States, Canada and Venezuela.

but since 1994,it has become the member of NAFTA (North American Free Trade Agreement............

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