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Sempra, Pemex Ink Costa Azul Liquefaction Study Pact

Units of Sempra Energy and Mexico's Petroleos Mexicanos (Pemex) have formalized an agreement to pursue development of a liquefied natural gas (LNG) liquefaction project at the existing Energia Costa Azul LNG import terminal in Ensenada, Mexico, on the Pacific Coast.

Sempra units IEnova and Sempra LNG, and Pemex signed a memorandum of understanding (MOU) that defines the basis for the parties to explore Pemex's participation in a liquefaction project, including joining efforts on its development and structuring agreements that would allow opportunities for Pemex to become a customer, natural gas supplier and investor.

"This is an important first step in working with Pemex on the development of liquefaction facilities at Energia Costa Azul," said Sempra Energy President Mark Snell.

It came to light late last year that Pemex was considering developing liquefaction capacity on the Pacific Coast (see Daily GPI, Nov. 6, 2014). Sempra executives said around that time that they were of a similar mind (see Daily GPI, Nov. 5, 2014).

Exports from Mexico would presumably be to Japan and other Asian markets. However, Mexico does not currently produce enough gas to meet its own needs. This is reflected in the fact that Mexico's imports of U.S. natural gas via pipeline have grown substantially in recent years (see Daily GPI, Feb. 6; Oct. 31, 2014).

"Mexico's total energy consumption in 2012 consisted mostly of oil (53%), followed by natural gas (36%)," the U.S. Energy Information Administration said in an April 2014 report. "Natural gas is increasingly replacing oil as a feedstock in power generation. However, because Mexico is a net importer of natural gas, higher levels of natural gas consumption will likely depend on more pipeline imports from the United States or...LNG imports from other countries."

When completed in 2008 (see Daily GPI, Sept. 8, 2008), Energia Costa Azul became the first LNG receipt terminal operating on the west coast of North America. The terminal is capable of processing up to 1 Bcf/d of natural gas.

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