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U.S. DOE Approves 1.7 Bcf/d Export Request to Planned Northwestern Mexico LNG Facility

More Texas-produced natural gas is set to head south of the border after federal authorities last week paved the way for Mexico Pacific Ltd. LLC (MPL) to export up to 1.7 Bcf/d to a planned liquefaction facility in the state of Sonora, Mexico, where gas then could be shipped to overseas markets.

In a Sept. 19 ruling, the U.S. Department of Energy’s (DOE) Office of Fossil Energy approved MPL’s application to export gas via existing cross-border natural gas transmission lines, including Kinder Morgan Inc.’s Sierrita Gas Pipeline LLC, which extends to the U.S.-Mexico border near Sasabe, AZ, to its planned 12 million metric ton/year (mmty) liquefied natural gas (LNG) facility. DOE’s approval is for 20 years.

The project would be constructed in stages, with the initial phase expected to have about 2-4 mmty of LNG capacity and each liquefaction unit able to produce about 1 mmty. MPL expects to start construction by early 2020, with in-service targeted for 2023.

From MPL’s facility, which is on the Gulf of California adjacent to Puerto Libertad, Mexico, the LNG could be delivered to other markets in Mexico not on the pipeline grid or re-exported to free trade agreement countries. MPL also is seeking authority to export gas worldwide; approval is pending.

MPL said it could access U.S. produced natural gas from the Permian and San Juan basins, the Eagle Ford Shale in South Texas and the Barnett Shale in North Texas. It would be adjacent to the Infraestructura Energetica Nova (IEnova) Sonora Pipeline, and benefit from “multiple natural gas supply routes, allowing both Henry Hub and Waha gas to be efficiently supplied to the site,” according to the website.

In its application, MPL identified other export pipelines through which gas may be transported to the IEnova pipeline, including the Comanche Trail, Roadrunner and Trans Pecos intrastate pipelines in West Texas.

In addition, more than 4 Bcf/d of pipeline capacity is expected to be available to export gas from West Texas to Mexico by the end of 2018, such that “there is ample existing cross-border capacity” to support delivery of the quantities of U.S.-sourced natural gas that MPL plans to liquefy, it said.

MPL said it is concluding a supply agreement to purchase an annual average of 400,000 MMBtu/d from Mexico’s CFEnergia (CFE), a marketing affiliate of the Comision Federal de Electricidad (CFE). CFE’s international fuel marketing subsidiary, CFE International LLC, holds a blanket authorization to import and export up to a combined total 2,920 Bcf of U.S. gas via pipeline. According to MPL, CFE controls the first 770 MMcf/d of capacity on the Sonora Pipeline.

MPL can also source gas from other marketers and can enter into a transportation agreement with CFE for the transportation and delivery of that gas via CFE-controlled capacity in the United States and Mexico.

Citing the facility’s close proximity to growing Asian and South American LNG demand centers, MPL said it can offer about 35% lower shipping costs to Asia compared with U.S. Gulf Coast-sourced LNG. It also avoids the risks and costs associated with the Panama Canal and can provide diversification from the Gulf of Mexico, where there are traffic and tropical storm activity risks, its website states.

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