Mexico’s gas-rich Lakach, once considered dead, is resurrected as an export project
New Fortress Energy Inc. (NFE) is moving forward with another LNG export project in Mexico.
On Tuesday, the company announced that it had finalized an agreement with Mexico’s national oil company Petróleos Mexicanos (Pemex) to develop and operate a natural gas field and liquefaction project offshore Veracruz.
The offshore liquefaction plant at the Lakach deepwater natural gas field would add to at least two liquefied natural gas units planned off the port of Altamira.
While these other projects will use US-sourced gas, for this project NFE would invest in the completion of seven offshore wells in the Lakach gas field over a two-year period.
NFE plans to deploy its 1.4mmty Sevan Driller floating liquefied natural gas (FLNG) unit, which is currently being prepared at a shipyard in Singapore, to the Lakach field.
“We are delighted to finalize our strategic partnership with Pemex, which reinforces our commitment to long-term operations in Mexico and which we believe demonstrates the substantial value of our integrated natural gas infrastructure business model,” said the CEO of NFE, Wes Edens. “This agreement represents the first of what we believe is an ideal formula for the deployment of NFE’s FLNG units in gas-locked areas around the world – a formula that combines gas for domestic use with low-cost supply for the export of LNG to world markets.”
NFE expects the overall cost of LNG production at Lakach to be among the lowest in the world.
The news comes as European LNG imports hit record prices. Given the location of the Atlantic coast, Europe would be the logical market for exports. NFE said it plans to bring more than half of the world’s planned LNG capacity additions online over the 2023-2024 period.
In Lakach, NFE said it would provide upstream services to Pemex. This would include the production of natural gas and condensate in exchange for a royalty for each unit of production delivered to Pemex. The fee would be based on a contractual formula based on industry standard gross profit sharing agreements.
NFE would also have the right to purchase volumes for its FLNG unit, while Pemex plans to sell the remaining natural gas volumes and all condensate produced to its onshore customers.
Edens said, “We appreciate President López Obrador’s continued interest and support for our development process and look forward to delivering reliable solutions that improve the energy security of the Mexican people and our customers around the world.
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Pemex discovered Lakach in 2007 and conducted exploration and development activities. But the company stopped its development due to falling oil prices and a change in strategy in 2014.
Octavio Romero Oropeza, CEO of Pemex, said, “We believe this partnership will enable Pemex to effectively leverage our domestic natural gas resources, meet Mexico’s security of supply objectives, and facilitate the development of gas-electric infrastructure in the region.
NFE and Pemex estimate that the Lakach field will produce around ten years, with the possibility of extending the life of the reserve if the neighboring Kunah and Piklis fields are developed. Coupled with these neighboring fields, the area around Lakach has a total resource potential of 3.3 Tcf.
Fast LNG Advantage
NFE’s competitive advantage lies in its belief that it can build and install LNG export projects faster than anyone else.
Speaking last week at LDC Forums’ US-Mexico Natural Gas Forum, NFE’s Chief Financial Officer Christopher Guinta said “no one on planet Earth will ignite LNG faster than New Fortress.” The company expects its modular units to be operational in 14 to 18 months.
NFE expects the first and second LNG units to be online in Mexico by the second half of next year. Guinta said Mexican authorities are helping with permits, labor, infrastructure and other needs. “I believe the Mexican president has made it a priority,” he said.
Guinta said he expects the Lakach project to be operational in the second half of 2024, which is before the end of the López Obrador presidency.