Private, Public Partnership Key to LNG Projects in Mexico
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Private, Public Partnership Key to LNG Projects in Mexico

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Perla Velasco By Perla Velasco | Journalist & Industry Analyst - Tue, 06/06/2023 - 16:59

In an effort to advance its liquefied natural gas (LNG) projects, Mexico’s Federal Electricity Commission (CFE) Mexico has turned to the private sector to develop such ventures. 

Supported by the federal government, CFE seeks to collaborate with private players that can provide the necessary knowledge and resources for the implementation of large LNG projects. In return, private entities can partner with CFE and ensure a stable and cost-effective supply of gas, which is crucial for the development of LNG initiatives.

However, the Mexican energy regulator, CRE, has proposed updates to the country's natural gas transport and storage tariff regulations, which could pose obstacles for LNG developers. In addition, unclear permitting processes at various energy agencies in Mexico have contributed to a less standardized environment. In contrast, the permitting process with the US Department of Energy, where most of the gas would be sourced, follows a standardized approach with publicly-available updates.

According to Independent Commodity Intelligence Services (ICIS), companies seeking to enter Mexico's LNG industry must possess a high-risk tolerance and adopt a long-term engagement strategy to navigate the growing complexities within the country's energy context. ICIS further notes that the regulatory framework for LNG exporting had to be established on the go, as there was no precedent for this activity in Mexico. CRE's regulation, in particular, has been criticized for its discretionary approach.

Despite these challenges, recent developments indicate progress in Mexico's LNG sector. CFE and New Fortress Energy have recently signed an agreement to collaborate on the development of LNG plants. The company is expected to handle about 1.4 million annual tons of LNG, primarily supporting CFE in its clean electric power generation efforts and catering to other global clients.

As Mexico's energy landscape continues to evolve, collaboration between CFE and private entities becomes crucial to overcome the complexities of LNG project development. The establishment of clear and standardized regulations, along with streamlined permitting processes, will be essential to foster a thriving LNG industry in the country.

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