Mexico Energy Monitor 

Mexico Energy Monitor 

November 8, 2023


NFE’s Mexico LNG projects hit speedbumps

  • Fresh issues have emerged on two of Mexico’s highest profile, private-public energy projects in recent years, both involving US LNG player New Fortress Energy (NFE).
  • In a new development, Reuters reported Tuesday November 7 the company was scrapping a deal with national oil company Pemex to revive the Lakach deepwater project, a scheme whereby NFE, who has no experience drilling or developing deepwater projects, would invest US$1.5 billion to complete work on wells in the highly complex project off the coast of Veracruz state with NFE packaging collected gas in part for export with Pemex taking its part in extracted hydrocarbons to supply Mexico’s ever-growing natural gas demand as the domestic off taker. The site is one of the first deepwater reserves discovered in Mexican waters. The play has an estimated 900 billion cubic feet of natural gas in reserves, but being deepwater, development is extraordinarily complex and costly. And Pemex scrapped its own plans to develop Lakach the first time in 2016. Reuters cited unnamed individuals with close knowledge of the project in its story.
  • CEO Wes Edens fielded a question on Lakach and stranded gas assets Wednesday morning during the NFE’s 3Q23 investor call, where he said that in the Gulf of Mexico, “I have no doubt there’s a big need” to address stranded gas in the Gulf, but without confirming the project is scrapped, he said, implying cancelation “Our focus is very much on FLNG 1 and FLNG 2” and otherwise on the Mexico side in the Gulf of Mexico, “We have no plans other than that.”
  • The company in that call to investors did describe the matter of the DOE inquiry as now resolved, calling it a ‘non-event’ that was tied to ‘nomenclature’. Edens stressed that if they wanted to put something onshore, the company fully understands that it would be a new regulatory process with the DOE, and he added, the DOE understood and appreciated the clarification. He added that NFE continues to evaluate the possibility of placing additional assets onshore, but for the time being FLNG 1 and 2 are offshore, with CFO Chris Guinta noting that gas is already flowing to FLNG 1, and they expect the first LNG to flow in the next few weeks.
  • Speaking to Miranda Intelligence, Rosanety Barrios, a Mexico energy consultant and former official at the energy ministry, said ending the Lakach project is the right move “at least for NFE”, adding that the signal from the DOE suggests it is in NFE’s best interest to “go ahead with the offshore” aspects of Altamira for now. Meanwhile, said Barrios, it is in Mexico’s best interest “to have a natural gas national demand forecast”, with energy officials integrating a data-based, realistic model for growing demand for NG in its project priorities.
  • Miriam Grunstein, senior partner at Brilliant Energy Consulting and a scholar with the Center for the United States and Mexico at the Baker Institute for Public Policy, took issue with the project from its outset in July 2022. She said that the government’s push for a stake in deepwater development did not originate in the current administration and that the Lakach first gained attention for development under the presidency of Felipe Calderón (2006-2012), saying this latest iteration of development with Pemex onboard is “the continuation of [Calderon’s] stubbornness. Deepwater for deepwater’s sake, regardless of the commercial implications.” Grunstein said neither the heavily indebted Pemex or the still young NFE have “the experience, technology or financial resources to take such a heavy load, such a risky venture.” The expert added that too much excitement is attributed to NFE’s fast modular technology being deployed at Altamira.
  • And yet, the Altamira export development is at the center of a portfolio of natural gas, LNG and pipeline projects that have materialized in the last few years between CFE and private companies, including Sempra Infrastructure, TC Energy and Mexico Pacific. The projects are notable in that they have all involved close negotiations with the administration of Mexican President Andrés Manuel López Obrador (AMLO), energy officials and state-owned energy concerns CFE and national oil company Pemex. Mexico’s potential as an LNG exporter has grown in relevance in recent years with geopolitical developments, particularly the EU’s fresh demand for more LNG considering Russia’s invasion of Ukraine, and the administration has made it a priority for expanding access to natural gas to underserved regions of the country, namely the southeast and Yucatán Peninsula.
  • FLNG 1 is the first of NFE’s two export project lines with capacity each of 1.4 million tons of LNG per annum (MTPA), FLNG 2 being the other, representing US$1.3 billion in investment. A recent SEC filing indicated a November start date for first LNG at FLNG 1, which according to the filing added the three-platform facility is “installed and connected to gas”. FLNG 2 is under construction and scheduled to bring another 1.4 MTPA online in 2025. Both projects are drawing on natural gas supplied from Texas via pipeline, hence the DOE permitting involvement. And developing Altamira as an LNG export hub would be a significant, new steady flow for natural gas exports.
  • Energy analysis group East Daley said in a recent report it expects the new offshore LNG project to create new demand at the Agua Dulce hub in South Texas. Gas could flow down Enbridge’s (ENB) Valley Crossing Pipeline to an interconnect with TC Energy’s Sur De Texas – Tuxpan pipeline.
  • Separately, NFE’s “fast LNG” liquefaction and modular processing for export developments on Mexico’s northern Gulf coast based out of Altamira in Tamaulipas state, received an October 30 letter from US Department of Energy’s (DOE) Office of Fossil Energy and Carbon Management (FECM) asking for clarification with respect to possible new works that would be onshore.
  • The FECM warned the company that if any aspects of the Altamira development were to be built onshore it would need to resubmit an application for an export permit. Specifically, the agency took issue with recent comments surrounding the addition of a possible 1.4 MTPA FLNG 3 project, which would be onshore. The company issued a response to the FECM to say, “the onshore project is still in the preliminary stages of development, subject, among other things, to binding commercial agreements and the filing of applications in conjunction with the Mexican permitting process.”
  • The company added, it “is well aware that it must obtain authorization from the U.S. Department of Energy should it seek to export U.S.-sourced natural gas to Mexico for re-export from a potential onshore project.” A DOE email on November 2 emerged to say the agency acknowledged receipt, adding a thanks for “providing clarification”, though it would continue to review the situation.

Iberdrola México pivot advancing apace

  • Iberdrola México, the local subsidiary of Spanish energy giant Iberdrola, continues to advance on plans to reconfigure its participation in the Mexican energy market, following a pivotal deal with the Mexican government made in May to divest a portfolio of 13 power plants, including co-generation plants and an onshore wind farm for US$6 billion.
  • In a special October 30 session, Mexico’s energy regulator CRE signed off on permits for the sale of electricity produced at 15 Iberdrola-built plants, including the 13 being handed over under the deal and two others still under Iberdrola México, ending years of regulatory blocks to the capacity from the plants reaching the national grid.
  • These include Iberdrola Energía Monterrey; Parques Ecológicos de México; Iberdrola Energía La Laguna; Iberdrola Energía Tamazunchale; Iberdrola Energía Monterrey; Central Dulces Nombres II; Pier II Quecholac Felipe Ángeles; Eólica Dos Arbolitos; Parque Industrial de Energía Renovable; Pier IV; Iberdrola Energía del Golfo; Iberdrola Energía Altamira; Enertek; Iberdrola Cogeneración Ramos; Iberdrola Cogeneración Altamira; and Iberdrola Cogeneración Bajío.
  • Enrique Alba, CEO of the subsidiary, speaking at the recent Iberdrola Digital Summit Mexico emphasized the company’s change in focus in Mexico towards renewables and decarbonization projects with the sale of IM’s gas plants.
  • “We want to play a leading role in the energy transition, we want to take advantage of the country’s excellent wind and solar resources to generate clean, reliable and cheap energy,” said the CEO, with IM head of planning and sustainability Katya Somohano, adding in an interview with energy news outlet Energía a Debate that Iberdrola is set to reinvest the entirety of the revenue from the 13 plants towards this new strategy.

CFE on push for 2 northern transmission projects w/ ~300 tenders

  • CFE is signaling a fast ramp up in tenders to start works on improvements to the national power grid before AMLO leaves office in October 2024.
  • In an interview with news and data site BNamericas, Salvador Portillo Arellano, head of electric power manufacturers association Caname, said CFE is looking to tender roughly 300 transmission and substation works by end-2024, focusing heavily on the Yucatán Peninsula and the northwestern hub of Sinaloa, Nayarit and Sonora states.
  • “This transmission and distribution infrastructure program is basic and necessary. Unfortunately, everything is coming together in a very short period of time, where manufacturing time is tight. We will have to find a way to be able to supply the equipment that CFE requires in a timely manner and in line with its projection, but it’s complicated,” Portillo told the outlet.


Output from Mexico’s national crude oil platform, including Pemex and its private sector partners, is moving further and further away from the 2.0 million barrels per day (Mb/d) goal for 2024 established by President López Obrador at the start of his term in 2018, with Pemex reporting the daily average in 2023 from January to September at just 1.596Mb/d. This is down 5.8% from the 1.694MB/d averaged in the same 9 months of 2022, according to a 3Q23 analysis from competition think tank IMCO.

The report added, “Between January and September 2023, Pemex and its partners extracted the lowest recorded amount of crude oil (not including condensates) for a similar period in the last 13 years (2011-2023).”

AMLO placed the reinvigoration of oil production at the center of his administration’s objectives in 2018 and has led significant efforts to assist the company in alleviating its debt burden and cutting its tax contribution rate significantly. But the company has also been plagued by accidents and other immediate problems. Critics say government supports to tamp down debt at Pemex do little in comparison to the level of investment needed to renew infrastructure and modernize the company towards transitioning Pemex into a profitable enterprise.

On the upside, IMCO detailed that the production of natural gas by Pemex and its partners during the first nine months of 2023 increased 5.3% compared to that observed in the same period of 2022.

The following chart from national hydrocarbons regulator CNH’s data site does demonstrate a relative leveling out in national oil production, but it remains far from the rebound the president has long targeted.