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Analysis

Mexico’s LNG Terminals

Tue, 01/22/2013 - 11:13

Mexico has currently two Liquefied Natural Gas (LNG) terminals on the Pacific coast, at Manzanillo and Ensenada, and one in the Gulf Coast located in Altamira, Tamaulipas. All of Mexico’s LNG facilities are regasification terminals, built to receive gas in a liquefied state and convert it back to gaseous form. The advantage of LNG lies in the fact that it takes up 1/600th of the volume of natural gas in its gaseous state. Indeed, the energy density of LNG is 2.4 times heavier than compressed natural gas (CNG). This makes LNG much more cost e·cient to transport long distances, which is done both by sea and by road, in specially designed cryogenic tankers.

Mexico is increasingly relying on LNG to prevent energy shortages, and resulting grid failures, due to rising energy demand combined with decreasing domestic production, and, in the case of Mexico pipeline bottlenecks limiting access to much cheaper imports from the US. Pemex paid US$19.45/mmBtu on the spot market for an LNG cargo in March, and in April brought in a spot market shipment at US$15.85/mmBtu, while importing natural gas by pipeline costs substantially less at around US$4/mmBtu. Mexico’s CFE, the state owned electricity company, is expecting to contract a large number of LNG cargos throughout 2013 and 2014. At the end of 2014, large pipeline projects should come unlock increasing access to cheaper US imports.

1. ALTAMIRA LNG TERMINAL

The Altamira LNG terminal near Tampico began operations in August 2006 as a joint venture between Shell (50%), Total (25%), and Mitsui & Co (25%), and is the first regasification terminal in Mexico and Latin America. The terminal has two tanks, each with a storage capacity of 5.30mcf and an annual emission capacity of 261.33bcf, and a jetty that can receive LNG vessels with a load of up to 7.63mcf. The emission capacity could be increased to 353.15bcf with the construction of a third tank, but this is unlikely to happen in the near future given current natural gas prices. Throughput capacity of 261.33bcf per year has been fully contracted for a long-term period. In September 2011, the terminal was sold to a joint venture of Enagas and Vopak (60%) for US$408 million.

2. COSTA AZUL LNG TERMINAL

The Costa Azul LNG terminal at Ensenada, Baja California, which began construction in 2005 and started operating in May 2008, can process up to 1 bcf of natural gas per day, with a potential to increase capacity to 2.5bcf/d. Furthermore, the Costa Azul LNG terminal is removed from residential areas and has access to deep coastal waters. The natural gas processed at Costa Azul is delivered via a 45-mile section of the Bajanorte pipeline system, which allows it to serve the energy needs of Baja California; however, due to the relative low energy needs of the state, remaining gas is exported to the US. The Costa Azul LNG Terminal was the first on the North American Pacific Coast and cost around US$975 million.

3. MANZANILLO LNG TERMINAL

The Manzanillo LNG facility was constructed in 2008 and began operations in 2012. The facility is owned by KMS de GNL, which is a joint venture between KOGAS, Mitsui, and Samsung, and cost around US$900 million. The plant consists of two 150,000m3 storage tanks, an LNG facility with the capacity to gasify and deliver 3.8 million tonnes of gas per year, and a port facility for ships to dock and unload/upload from 70,000 up to 216,000m3 of LNG. The main supplier to the plant is a Peruvian LNG Terminal near the city of Pisco, the plant’s main customer is CFE, and most of the gas is transported to consumers via the Guadalajara Gas Pipeline. Even though the plant is currently in operation, it will not reach maximum capacity until 2013.