Mexico Moves Forward with LNG Projects, Lakach
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Mexico Moves Forward with LNG Projects, Lakach

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Perla Velasco By Perla Velasco | Journalist & Industry Analyst - Wed, 11/16/2022 - 16:19

This week, US company New Fortress Energy announced it expects to sign a commercial agreement with Mexico’s government for the development of an offshore LNG production plant. New Fortress also planned to complete the drilling of seven wells that PEMEX had already started at Lakach. The IOC aims to liquefy and export the natural gas produced through the 1.4MMt/y floating liquefied natural gas (FLNG) unit and an offshore gas processing plant. The agreement anticipates the remaining gas output from the wells to be sent to Mexico’s internal market.

In July, Wesley Edens, CEO, New Fortress Energy, said that the companies expected the project to be operational by the end of 2023. He added that the Lakach field has the potential to supply up to 1.8Bcf/d and might become the country's first commercial deepwater gas project.

According to Reuters, PEMEX and the CNH disagreed on the feasibility of the Lakach project in September. Despite the field’s enormous natural gas reserves, CNH questioned whether the resources invested in the project and rising costs had hindered its development, but a change of position for the CNH director appeared to have pushed the disagreement to the background.

At the end of October, the CNH announced its new Director, Agustín Díaz Lastra. CNH later approved PEMEX to invest US1.8 billion more in the Lakach field. According to CNH, the Lakach field should have started producing in 2016, but the project stalled due to execution problems. From 2016 to 2021, the NOC has already invested US$1.1 billion. PEMEX also changed its extraction goal in Lakach to 847.90Bcf, a decrease, since in the previous plan 922.05Bcf was considered.

Last week, New Fortress pushed back its first production at Lakach projection to the summer of 2024. The company also shared that a third of the production of the asset will be for the state and the domestic fuel supply. New Fortress plans to invest in the field over a period of two years and export most of its production. LNG projects have grown in importance in the face of skyrocketing gas prices and growing demand from the European and Asian markets.

New Fortress’ exportation strategy includes another project with CFE in Altamira, Tabasco, though this project is still subject to speculation as both parties lack experience in the deepwater environment. PEMEX will have to inform CNH every six months of the plan’s critical risks and present a corresponding mitigation plan, as well as carry out quarterly reports on the progress made.

Nevertheless, Mexico still needs to enhance its infrastructure to ensure it can develop its LNG hubs. According to experts, the country may not have enough capacity and pipelines to successfully support these projects. “There are a lot of moving parts that need to work in cohesion for these Mexico LNG projects to happen,” said Andrew Baker, Senior Editor, Natural Gas Intelligence.

Photo by:   Twitter @Pemex

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