Mexico LNG Projects Seen Offering Lifeline for Permian Natural Gas 

By Christopher Lenton April 17, 2023 www.naturalgasintel.com

As Waha natural gas prices languish below $1/MMBtu, attention is increasingly turning to Mexico as a possible outlet for incremental gas volumes from the Permian Basin.

With more than 6 Bcf/d of LNG export projects in varying stages of development, Mexico presents an interesting opportunity to move West Texas gas to the global LNG market, according to Poten & Partners’ Sergio Chapa, senior LNG analyst.

“The whole sales pitch there is that you’re just re-exporting U.S. natural gas,” Chapa told NGI on a recent episode of the Hub and Flow podcast. “There are several cross-border pipelines that send natural gas from the Permian Basin and the Waha hub to various destinations in Mexico.”

Plans are underway to expand the cross-border capacity as well.

Oneok Inc.’s proposed Saguaro Connector pipeline is emerging as “a dark horse candidate” for the next greenfield Permian egress pipe, Tudor, Pickering, Holt & Co. analyst Colton Bean said Monday.

The 155-mile, 48-inch diameter pipeline has a targeted in-service date of 2026, and is meant to connect the Waha hub with Mexico Pacific Limited LLC’s (MPL) Saguaro LNG export terminal envisaged for Puerto Libertad in Mexico’s Sonora state.

The terminal has yet to reach a final investment decision (FID), but MPL has secured binding offtake agreements from the likes of Shell plc, ExxonMobil and China’s Guangzhou Development Group.

MPL has “experienced a surge in commercial activity” driven by LNG demand in Asia, Chapa said. 

He explained that MPL is securing offtake agreements for about 2 million metric tons/year each, and offering different types of contractual arrangements to meet the needs of each offtaker.

BTU Analytics’ Bailey McLaughlin, in a post last week, broke down nine planned LNG export projects in Mexico into three tiers, based on their likelihood of achieving FID.

The Tier A facilities, both of which are currently under construction, comprise Sempra’s Energía Costa Azul (ECA) Phase 1 terminal in Baja California and New Fortress Energy Inc.’s floating LNG terminal offshore Altamira, Tamaulipas, on Mexico’s East Coast.

The projects would have export capacities of about 0.43 Bcf/d and 0.18 Bcf/d, respectively. 

MPL’s first phase falls into the Tier B category, McLaughlin said. He noted that “current pipeline infrastructure within Sonora and Chihuahua would only allow one train to run at full utilization.”

Tier C, meanwhile, includes projects in earlier stages of development – namely Amigo LNG, ECA Phase 2, NFE’s Lakach floating LNG project, MPL’s second train, and the Vista Pacífico project proposed by Sempra. 

Natural gas pipeline and LNG export projects that have managed to move forward in Mexico recently all have one thing in common, according to Chapa.

“To be successful in Mexico, you need to partner with, or be a customer of the state somehow,” he said, “and we’ve seen that all across the board on these LNG projects.”

If the LNG terminals proposed for Mexico come to fruition, “Mexico could be…overnight the fourth-largest LNG exporter in the world,” Chapa said, with the asterisk that “they’re re-exporting U.S. natural gas.”