Rebecca Conan, Argus

MEXICO CITY
Energiesnet.com 02 08 2024

US President Joe Biden’s decision to pause LNG export permits is unlikely to affect existing export projects in Mexico, but a longer pause or later ban on new ones could cloud expansion plans and stymy project launches.

“Biden’s decision could pose a challenge to the long-term plan of developers eyeing to serve Asian markets from Mexico with US-produced natural gas, especially in the case of prospective projects that are yet to secure approval from US authorities,” Adrian Duhalt, research scholar at Columbia University’s Center on Global Energy Policy told Argus.

The Biden administration announced a pause in late January on pending decisions on permits to export LNG to non-free trade agreement (non-FTA) countries until a review of “economic, environmental and national security considerations,” can be carried out, energy secretary Jennifer Granholm said.

With global LNG supply tight amid increasing demand in Asia and Europe following the start of the Russia-Ukraine war, a flurry of Mexican export terminals have launched development in recent years.

Private sector developers and state company CFE hope to capitalize on Mexico’s proximity to abundant and economic supplies of US pipeline gas and transit constraints at the Panama Canal.

All Mexican LNG export terminals require permits from the US Department of Energy because they are supplied with US pipeline gas. But of the five projects being actively developed, Argus has confirmed existing non-FTA permits for all but one, New Fortress Energy’s Gulf coast Altamira fast LNG export terminal, due to launch this month.

New Fortress Energy did not respond to requests for comment, but a non-FTA permit does not appear in the US Department of Energy’s updated register as of December 2023.

Given that the world’s largest LNG importers are countries without free trade agreements with the US, such as China, India and Japan, the lack of a non-FTA permit would restrict the Altamira terminal’s offtaker base.

The next LNG export terminal slated for launch is Sempra Infrastructure’s 3mn t/yr Energia Costa Azul project that will start operations in mid-2025. Sempra told Argus is has valid Non-FTA permits for both Costa Azul and the Vista Pacifico export terminal in the Pacific coast port of Topolobampo.

Additional LNG export terminals are slated for the Pacific coast, including Mexico Pacific’s 28.2mn t/yr Saguaro Energia terminal in Puerto Libertad and Singapore-based LNG Alliance’s 7.8mn t/yr Amigo LNG export terminal near the port of Guaymas, Sonora.

Mexico Pacific’s terminal has valid non-FTA and FTA permits, but its non-FTA permit expires on 14 December 2025, according to Department of Energy records.

The company hopes to make a final investment decision on its first two phases in the “near term”.

“We remain committed to our further growth plans, fully confident we will continue to receive future regulatory approvals for our growth projects,” Mexico Pacific told Argus.

Singapore-based LNG Alliance’s 7.8mn t/yr Amigo LNG export terminal “will not be impacted as FTA and non-FTA export permits were approved on 8 December 2020,”and do not expire until August 2027, the developer told Argus.

Concerned offtakers have been calling Mexican-based projects in recent weeks to clarify the impact the pause will have on their existing contracts and uncontracted capacity, industry sources tell Argus.

The alternative view, proposed by Duhalt, is that already-permitted projects in Mexico could actually attract more interest from Asian buyers given the potential to limit new projects further down the line.

argusmedia.com 02 05 2024