The Biden administration’s pause on new approvals for LNG exports to non-free trade agreement (FTA) countries is casting doubt over the future of liquefaction projects in Mexico that would rely on U.S. feed gas.
The prospect of bypassing the Panama canal and shipping U.S. sourced natural gas to the Asia-Pacific market by way of Mexico’s Pacific Coast has triggered proposals for a dozen or so liquefaction projects in Mexico in recent years.
These include Sempra’s 3.25 million metric tons/year (mmty) Energía Costa Azul (ECA) Phase 1 project, which is under construction and set to begin exporting cargoes in summer 2025. Other advanced projects include New Fortress Energy Inc.’s (NFE) Altamira Fast LNG (FLNG) 1, which the company said will begin commercial operations in July.
Nearly all of the other liquefaction projects planned for Mexico, however, could be impacted by Biden’s permit pause, said Poten & Partners’ Sergio Chapa, senior LNG analyst for the Americas, in a recent webinar.
This is because all of them, except for the Lakach floating LNG terminal offshore southeastern Mexico, would rely on feed gas from the United States.
Four of the projects – Saguaro Energía LNG Phase 1, ECA Phase 2, Vista Pacífico and Amigo LNG – have secured non-FTA export approval from DOE, Chapa said. “However, not all of them have enough time to secure financing, get built and send out [their] first [cargoes],” he added. Each non-FTA export approval has an expiration date by which companies must either export their first LNG cargo or be granted an extension.
“It’s worth noting that the pause doesn’t affect extension requests,” Chapa said. “However, [DOE] has made it harder to obtain extensions.” For an extension to be considered, projects must be under construction and demonstrate extenuating circumstances, which do not include the Covid-19 pandemic, Chapa noted.
Saguaro Energia Phase 1 and ECA Phase 2, for example, face expiration of their non-FTA approvals in December 2025 and March 2026, respectively. Since neither project has reached final investment decision (FID), there is likely “not enough time” for those projects to be completed, according to Chapa.
Amigo LNG and Vista Pacífico have a bit more breathing room with expiration dates of December 2027 and December 2029, respectively, although these projects also have yet to reach FID. Altamira FLNG Phase 1 and Saguaro Energía Phase 2, were seeking non-FTA approvals at the time the pause was implemented.
Meanwhile, developers are grappling with uncertainty brought by the freeze on approvals.
The pause “makes no sense,” said Sam Thigpen, CEO of Sapphire Gas Solutions, a small-scale LNG producer active in Mexico, at the Mexico Gas Summit held recently in San Antonio. “The U.S. and North America as a whole has an enormous amount of resources. We have low cost natural gas, we can produce natural gas cleanly, cost efficiently, and we can get this energy to countries around the world that don’t have that luxury.
“The fact that we are even toying with and meddling in the trade of LNG internationally just boggles my mind.”
Large-scale liquefaction projects exporting U.S. LNG typically need non-FTA export approval to be considered commercially viable. However, developers of the proposed 4 million metric tons/year (mmty) Gato Negro LNG project are taking a different approach. The project sponsor, Big River Energy LLC, is seeking DOE approval only for exports to FTA countries which include South Korea, traditionally a top three global LNG buyer.
The Lakach floating LNG project, meanwhile, would liquefy gas extracted from the eponymous offshore field discovered by state oil company Petróleos Mexicanos (Pemex). Mexico’s outgoing president, Andrés Manuel López Obrador, indicated in recently that billionaire Carlos Slim has expressed interest in jointly developing the project with Pemex.
Last year, New Fortress Energy Inc. and Pemex reportedly terminated an agreement to jointly develop and operate the Lakach field and a liquefaction project off the coast of Veracruz.
