Mexico Energy Monitor

Mexico’s LNG Developers Drive Progress Despite Hurdles 

Altamira Fast LNG 

  • US LNG supplier New Fortress Energy (NFE) now expects the first cargo from its 1 million tonnes per year (mtpa) Fast LNG Altamira project offshore Mexico to load in June this year, it said in its first quarter 2024 report. NFE said that it had mechanically completed the unit and is currently commissioning it, with first liquified natural gas (LNG) expected later in May and the first full cargo exported in June. 
  • Executives confirmed during the company’s latest earnings call that the facility experienced a pipe fracture in mid-April. The issue is expected to be repaired without further delay, executives added.  
  • NFE failed to meet its original April 2024 deadline to produce a first cargo. Though a month or two delay is not unusual for a new project, NFE may face additional, deeper questions because the technology is so untested. NFE is planning to install two additional Fast LNG units onshore in Altamira by 2026. However, these technical delays in the first phase put a spotlight on the company’s timeline for the other two units. 


Gato Negro LNG  

  • A new Mexican LNG export project, known as Gato Negro, requested a long-term authorization from the US Department of Energy (DOE) to export US natural gas via pipeline to its planned liquefaction plant in Mexico, according to a DOE filing.
  • The DOE filing said that Gato Negro plans to export US domestically produced natural gas via pipeline to Mexico in a volume up to approximately 236 billion cubic feet (Bcf) per year (Bcf/yr) (0.647 Bcf per day), and to re-export approximately 203 Bcf/yr (0.556 Bcf per day) of this natural gas as liquefied natural gas (LNG) to Free Trade Agreement (FTA) countries for a period of 20 years commencing on September 1st, 2027.
  • The proposed project is considering floating liquefaction, although few details have been made available about its location or proposed capacity. There is almost no public information about the commercial status of this project. 


Mexico Pacific’s Saguaro LNG 

  • Mexico Pacific’s new CEO Sarah Bairstow met with the president of Mexico’s leading business group Consejo Coordinador Empresarial (CCE), according to a May 22nd CCE statement. This meeting follows Bairstow’s engagement with high-ranking Mexican business and political leaders, including the governor of the Mexican state of Sonora, Alfonso Durazo.
  • Mexico Pacific’s Saguaro LNG is the most advanced LNG export project in Mexico’s west coast. However, recent changes in the company’s leadership opened market scrutiny about the long-term health of the project. 
  • Mexico Pacific has so far signed LNG SPAs with six companies for a total of 12.2mtpa. Mexico Pacific was targeting simultaneous final investment decisions (FID) for its dedicated Sierra Madre pipeline and the first two trains by end-2023, with the third train six months later. The company failed to meet this deadline. 
  • Mexico Pacific already awarded the Sierra Madre pipeline’s engineering, procurement, and construction (EPC) contract and it has entered a strategic collaboration agreement with the local government in Sonora. US developer ONEOK expects FID on the Saguaro Connector Pipeline – the US-Mexico connector for Mexico Pacific’s Saguaro LNG project – by mid-2024. 
  • The upcoming presidential election in Mexico could lead to different energy priorities that could impact recent momentum for LNG export project development, although this rmeians to be seen. Mexican LNG projects previously received political support from the current administration of President Andres Manuel Lopez Obrador (AMLO) in the past, as well as from local political leaders. 
  • Any political transition following the June 2nd election could bring delays and changes in the permitting and construction process. There are some (unsubstantiated as yet) industry concerns that leading presidential candidate Claudia Sheinbaum will be more focused on dealing with the significant debt of state producer PEMEX and driving the country to a greener energy landscape than facilitating LNG exports. 


CENAGAS Advances on 2024 Public Consultation 

  • Mexico’s natural gas transmission system operator (TSO) CENAGAS plans to gather key market participants in face-to-face events in Mexico City as part of the 2024 public consultation period. CENAGAS conducts this annual exercise to receive recommendations and feedback from market participants on key elements of the natural gas industry.  
  • According to CENAGAS, during the events the TSO will present projections of future natural gas demand for key infrastructure projects of the administration of President Andres Manuel Lopez Obrador (AMLO), especially projects located in the southeastern part of the country. CENAGAS has focused during previous consultation periods on exploring the potential of natural gas as a driver of economic development in the area.  
  • One of those projects is the inter-oceanic corridor. CENAGAS said that the inter-oceanic corridor will require 11.3 million cubic feet of natural gas per day (MMcf)/d. The Tehuantepec isthmus inter-oceanic corridor is one of AMLO’s signature projects in the southeast. 
  • Mexican authorities intend to compete with the Panama Canal as a channel to move goods once this corridor is completed. The project would have 10 new industrial parks, and would provide tax incentives for companies that set up operations within it.

  • Various Mexican officials in the past have said that they plan to use the wind generation potential in the area to power some of these projects. Mexico’s government has not provided further details about how it intends to execute on these goals. However, CENAGAS has said that most of the demand for this project will be covered by state producer PEMEX, which has been slowly increasing its natural gas production. 
  • As part of the consultation process, CENAGAS is prioritizing natural gas storage capacity. Mexican authorities were supposed to issue tenders since 2018 for depleted onshore hydrocarbons sites or sites that were considered economically unviable for the extraction of hydrocarbons, in order to build the storage infrastructure needed.

  • Energy ministry SENER identified four sites: Acuyo in the state of Chiapas, Brazil in the state of Tamaulipas, Jaf in the state of Veracruz or Saramako in the state of Tabasco. However, the tenders were never awarded and even when energy regulator CRE has authorized permits for the development of storage projects, nothing has come online yet. Mexico currently has a storage capacity of 2.4 days of natural gas reserves. This contrasts with the capabilities of countries like France, which has a storage capacity of 98.8 days of reserves and Spain with 34.2 days. 



Mexico’s Power Consumption is Expanding Faster Than Expected – Moody’s

In the context of Mexico’s energy sector, currently operational power generation projects will become increasingly strategic over the next three to five years, Moody’s Ratings said in its latest report. 

According to the agency, this is driven by robust demand growth and a lack of new electricity supply. High electricity prices are expected to persist due to a strong local economy, record-breaking temperatures, and increased nearshoring activities. Political uncertainty will continue to delay the completion of new energy projects, favoring existing operations, Moody’s added. 

Power consumption in Mexico is expanding faster than the government anticipated, putting the sector in greater need of investment. In 2022-23, annual electricity demand significantly exceeded the projections of energy ministry SENER, boosting revenues for the state utility CFE.  

Moody’s concluded that to ensure the stability of the national system and maintain energy availability for all residential and industrial customers, expanding investments in capacity and transmission will be crucial. Existing operational energy projects are well-positioned to become more strategic, especially those supplying high-demand industrial centers, the agency concluded.