Mixed message as Mexico proposes Salina Cruz LNG project

• Government proposes its own LNG project on Pacific coast
• Sempra remains optimistic about Costa Azul FID
• SENER abruptly cancels key evaluation process until 2021

HOUSTON (ICIS)–The Mexican government, through a broad infrastructure plan, has proposed building a 0.5mtpa liquefaction plant in Salina Cruz in the state of Oaxaca.

The announcement made on 5 October throws into doubt the intent and aim of the Mexican government, which previously promoted the need for a liquefaction plant for the dedicated use of Mexican state-run utility CFE.

President Andres Manuel Lopez Obrador (AMLO) in August cited the potential for a second liquefaction project and noted other locations such as Ensenada and Topolobampo.

Sempra Energy’s existing Costa Azul import terminal in Ensenada, Baja California, is still awaiting a key permit from Mexican energy ministry SENER to be developed into a brownfield 2.5mtpa, one-train liquefaction project.

The project, which was considered on the brink of a final investment decision (FID) earlier this year, has instead seen its FID target date pushed back given the delays to the approval.

A Sempra spokeswoman said the company continues an active dialogue with the Mexican government for the required long-term export permit for the Costa Azul project.

“We remain optimistic we will receive the permit and make our final investment decision this year,” she said.

SALINA CRUZ

A company called Salina Cruz LNG is promoting a 0.5mtpa export project using existing marine infrastructure in the port. The project is targeting FID by 2021 with a potential start date of 2023, pending financing and other approvals.

The project would use an existing 115 million cubic feet (mcf)/day capacity pipeline operated by Mexico’s transmission system operator CENAGAS from Coatzacoalcos, Veracruz, bringing in offshore gas produced in the Gulf of Mexico. The pipeline ends about three miles from the project site.

The company’s presentation also stated that through a Letter of Intent from the Overseas Private Investment Corporation (OPIC), now known as the US International Development Finance Corporation, had committed $250m to the project.

The project is mainly targeting the domestic Mexican market, through potential customers such as LNG bunkering, small-scale trucking or bus fleets or possibly by rail.
The project scheme for the proposed 0.5mtpa floating liquefaction barge is now in the pre-front end engineering and design (pre-FEED) stage, and permitting activity for environmental and other regulatory approvals remains ongoing.

WEST COAST

Other liquefaction projects proposed for the west coast of Mexico are in various stages of development, but may have difficulty gaining traction given AMLO’s latest infrastructure plan specifically touting Salina Cruz. Mexico Pacific Limited (MPLNG) has looked to develop a 12.9mtpa liquefaction project in Puerto Libertad in the state of Sonora.

Its CEO Doug Shanda said in an interview with ICIS in August that their project has four non-binding agreements in place with northeast Asian companies that could be potential offtakers. Its targeted FID was expected sometime in the second half of 2021.

REGULATORY CHANGES

Further complicating the situation for energy project developers of all kinds is the abrupt three-month suspension of SENER’s mandatory social impact evaluation process known as EVIS in Spanish.

Sources said they they were shocked by the length of the suspension. One government official said the process had been cancelled even before 1 October because the team that manages that process fell ill. SENER did not respond to requests for comment.

One former senior government official said it was a bad sign for all projects.

“All projects presented before [energy regulator] CRE are required to show proof of having started the EVIS process at SENER. So, there will not be any projects presented to CRE until 2021,” the former official said.

A copy of the notice reviewed by ICIS said SENER would resume the social impact process on 4 January of next year.

Additional reporting by Claudia Espinosa