Skip Navigation
The University of Texas at Austin

Pemex plan for a $6 billion LNG export terminal faces skepticism

Pemex’s plan to build a $6-billion natural gas liquefaction plant at Salina Cruz is being met with skepticism. Analyst argue that Pemex lacks a track record for a comparable operation, and that there isn’t enough gas in Mexico.

pemexby Ronald Buchanan, Platts, November 10, 2014

A plan by Mexican state-owned Pemex to build a $6-billion natural gas liquefaction plant at Salina Cruz on the country’s Pacific Coast has been met with skepticism by analysts.

The aim of the project is to cash in on the wide differentials in natural gas prices between Asia and North America. Speaking at a conference in Houston, Alejandro Martinez, director-general of the Pemex Gas subsidiary, said that the gas would be transported by a planned natural gas pipeline linking Pajaritos on the Gulf of Mexico and Salina Cruz on the Pacific Coast, a distance of some 120 miles.

“The aim is to take advantage of our country’s geographical location and the business opportunities offered by the market conditions,” Martinez said last week in a Houston presentation to potential project investors.

“The natural gas that we produce in the Gulf of Mexico can be processed and exported to Asia and Oceania,” he added. The liquefaction plant could be coming on stream by 2020, he said.

Pemex provided a written statement and tweets with information from Martinez’s presentation.

Pemex does not aim to go it alone with the venture. The company looks to form a consortium with “strategic partners that can contribute operational excellence and capital.”

But George Baker, president of Houston-based consultancy, said over the weekend that Pemex lacks a track record for a comparable operation. And independent, Mexico City-based analyst David Shields said: “There simply isn’t enough gas in Mexico.”

Year to date through September, Mexico has produced 6.52 Bcf/d of natural gas, up from 6.37 Bcf/d in 2012, though well short of the 7 Bcf/d that it notched up in 2010.

“And only this week, the ministry announced a new agreement to pipe gas from Mexico to Guatemala and the rest of Central America,” said Shields.

In effect, the Guatemala project is a re-run. The 2000-2006 administration of Mexican President Vicente Fox planned a pipeline to link Mexico with Central America; it failed because there was no Mexican gas available. So far this year, imports of natural gas by pipeline have been 1.4 Bcf/d. The US Energy Information Administration estimates that Mexico last year imported the LNG equivalent of slightly more than 400,000 Mcf/d of gas, through its three reception terminals: Altamira, on the country’s northern Gulf Coast; Costa Azul in Baja California; and Manzanillo, on the central Pacific Coast.

But very soon imports will surge. Next month, the first stage of the $3 billion Los Ramones pipeline will pump US shale gas into Mexico’s industrial north. Phase two of Los Ramones is due to come on stream a year later, adding more than 2.1 Bcf/d to add to Mexico’s imports.

Los Ramones is a Pemex project. Other pipelines are bringing more US gas from the Pacific Coast.

In southern Mexico, however, from where Martinez said the Salina Cruz liquefaction plant will be supplied, much will depend on the success of the energy reform and also on Lakach, a deepwater reservoir off the coast of Veracruz. Pemex officials believe that Lakach and the neighboring Piklis and Kunah have some 4 Tcf of reserves.

The first stage in the development of Lakach came recently in the form of a $290-million contract for subsea production systems won by OneSubsea, a Cameron-Schlumberger joint venture.

Italy’s Saipem, a unit of Eni, will link the subsea system to onshore processing installations.

Meanwhile, the Salina Cruz project could face competition, said Baker. IEnova, the Mexican unit of Sempra and owner of Costa Azul, could be particularly well-placed for exports to Asia if its opts to build a liquefaction plant.

Moreover, Baker says, Cheniere Energy’s plan to liquefy 2 Bcf/d at the Sabine Pass liquefaction plant it is now building in Louisiana could reach Asian markets via the expansion of the Panama Canal.

And Shields points out that the proposed $6-billion budget for Salina Cruz appears to be very low for a plant of such dimensions. “That would seem to point to a floating terminal,” he says. “If it doesn’t work out commercially, it could be rented to somebody elsewhere.”

UT Main  |  UT Directory  |  UT Direct  |  Canvas  |  Privacy Policy  |  Accessibility
© 2021 Jackson School of Geosciences, The University of Texas at Austin
Site Last Modified: April 18, 2017
WP Twitter Auto Publish Powered By :