PEMEX and New Fortress Sign Billion-Dollar Contract

New Fortress Energy (NFE) and PEMEX signed a contract to produce liquified natural gas (LNG) from the previously-abandoned Lakach field. Last week, New Fortress announced it expected to sign the commercial agreement with PEMEX. The two companies will join efforts to resume development in the deepwater gas field Lakach. NFE will develop an LNG plant over a period of two years and will complete seven offshore wells and the deployment of a 1.4MTPA Sevan Driller floating LNG unit to liquefy most of the gas obtained from the field.

Lakach’s development had been stalled for six years due to cost pressures, even though the NOC had invested US$1.1 billion in it from 2016 to 2021. Recently, CNH approved PEMEX’s extra investment of US$1.8 billion. New Fortress Energy will add US$1.5 billion to this figure. The NOC will own Lakach and after the termination of the contract, it will fully own the remaining infrastructure.

According to the contract, production will start in mid-2024. The companies project to extract 300MMcf/d on average over a period of 10 years. PEMEX will sell 190MMcf/d to New Fortress and 110MMcf/d will go to the internal market. PEMEX also announced that there are another three plays with bigger reserves near Lakach, which it will examine. NFE reported the possibility of extending the reserve’s life by extending it to the Kunah and Piklis fields, depending on how development progresses. “Coupled with these nearby fields, the area around Lakach has a total resource potential of 3.3 trillion cf and comprises one of the most significant undeveloped offshore natural gas resources in the western hemisphere,” reported NFE.

NFE plans to develop other four FLNG units over two years. This way, the company expects to add approximately 7MTPA of incremental liquefaction capacity to the global market. According to NFE, this is more than half of the world’s total expected capacity additions during 2023 and 2024. “Pursuant to the agreements, NFE will provide upstream services to PEMEX whereby NFE produces natural gas and condensate in exchange for a fee for every unit of production delivered to Pemex. The fee is based on a contractual formula that resembles industry-standard gross profit-sharing agreements between the upstream service provider, NFE, and the owner of the hydrocarbons, PEMEX,” reported NFE.

As previously reported by MBN, New Fortress planned to export most of the obtained LNG and to keep a part for the Mexican market to support Mexico’s energy self-sufficiency plans. According to experts, the country may not have enough capacity and pipelines to successfully support these projects, so it possibly needs to develop further infrastructure. “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.