Mexico's state power utility has struck a deal with Canada's TC Energy Corp. to develop a natural gas pipeline in the country's south and consolidate the firm's contracts in the central region, the utility said on Aug. 1.

The pact appeared to mark a rare moment of agreement after months of dispute between energy companies and Mexico, which said such firms had benefited from contracts that put an unfair burden on taxpayers.

The new pipeline in the south will start in Tuxpan in the Mexican state of Veracruz and run by sea to link with the Mayakan pipeline in the states of Campeche and Tabasco.

"The agreement aims to solve a long-running problem of the lack of natural gas supply in the Mexican southeast and the Yucatan peninsula," the Comision Federal de Electricidad (CFE) said in a statement.

The pact also says Mexico will step up efforts to help TC Energy complete the Tuxpan-Tula pipeline after work stalled over concerns the project would cut across lands local communities consider sacred.

Last year, President Andres Manuel Lopez Obrador had suggested re-routing the 178-mile (286-km) pipeline, but the utility did not say how it would resolve the matter.

"The CFE has agreed with TC Energy that it will take a more active role that will allow for solving social conflicts and completing the Tuxpan-Tula pipeline," it said.

Bundling together together TC Energy's contracts in central Mexico would generate savings for the utility, it added.

In 2019, Lopez Obrador's government said it had persuaded TC Energy and other pipeline developers to waive significant profits from deals signed under the previous administration after renegotiating the contracts.

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