A proposed liquefied natural gas (LNG) export project touted by Mexico’s government is not logistically or economically feasible under current conditions, according to Gadex consultancy co-founder Eduardo Prud’homme.
The government this month unveiled a long-awaited infrastructure plan with five projects listed under the energy category, including a 25.2 billion-peso ($1.18 billion) gas export terminal in Salina Cruz on the Pacific Coast.
The terminal would have a liquefaction capacity of 200 MMcf/d with the option to expand to 400 MMcf/d, according to government documents, with construction slated to begin in 2021.
The problem, however, is that, “basically, they don’t have gas to liquefy,” Prud’homme told NGI’s Mexico GPI.
Gas would have to be sourced from production by state oil company Petróleos Mexicanos (Pemex), and/or via the Sur de Texas-Tuxpan offshore pipeline that moves gas from South Texas to Mexico’s Veracruz state.
Neither of these sources are currently in conditions to meet the terminal’s gas supply needs, Prud’homme said, explaining that Pemex is not producing anywhere near enough gas. Furthermore, there is no commercial pipeline route as of now to connect gas supply from the offshore pipeline to Salina Cruz.
Salina Cruz currently connects with Jáltipan on the other side of the Tehuantepec isthmus via the 12-inch diameter, 90 MMcf/d Jáltipan-Salina Cruz natural gas pipeline, in theory allowing access to gas produced by Pemex and gas imported by pipeline from the United States.
The government has indicated it plans to reactivate a shelved project to expand gas transport capacity from Jaltipán to Salina Cruz, although details remain scarce.
Nor is it clear how the economics of the LNG export project would work, Prud’homme said last Friday (Oct. 9) during a virtual panel discussion organized by the #WeTweetEnergy collective, an online community of Mexico energy experts.
He explained that the cost of transporting gas from the United States all the way to Salina Cruz would make it difficult for the molecules to compete in Asia, which would presumably be the project’s main export market. No offtakers for the project have been announced either, he said.
Prud’homme added that the government’s estimate for the project’s cost appears to be well below that of comparable liquefaction terminals.
“We can’t take it very seriously as an infrastructure project,” he said of the larger infrastructure plan, “because for me, it’s an emblem of how uncoordinated the energy planning is in this administration.”
The plan consists of a list of projects with no explanation of how they will be funded, according to Prud’homme, nor in what capacity the private sector would participate in their development.
Prud’homme shared the digital stage with experts including local midstream and downstream consultant Davis Rosales and IHS Markit associate director of business development Erick Salas, all of whom agreed the infrastructure plan was underwhelming and short on crucial details.
The LNG terminal would be spearheaded by state power company Comisión Federal de Electricidad (CFE) and Administración Portuaria Integral (API).
Sempra Energy and Mexico Pacific Limited LLC (MPL) are each developing their own LNG export projects on Mexico’s Pacific Coast. Both are nearing final investment decisions. MPL’s Sarah Bairstow, chief commercial officer, recently cited the favorable economics and regulations for liquefaction projects in Mexico targeting Asian export markets.
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