Friday, April 12, 2024

Mexico Pacific signs 20-year LNG deal with Chinese company

Houston-based company Mexico Pacific Limited (MPL) will sell 1 million tonnes of liquefied natural gas (LNG) per year over a 20-year-period to Chinese company Zhejiang Energy, using a Mexican LNG production facility in Sonora under development by MPL.

MPL’s Saguaro Energía plant, to be located in Puerto Libertad, Sonora, will process natural gas bought from U.S. producers and exported to Mexico via existing cross-border pipelines before shipping it onward to Asia. MPL has said it will begin exporting gas in 2027.

A CGI-render of the Saguaro Energia facility in Sonora
A CGI rendering of the planned Saguaro Energia facility in Sonora. (Mexico Pacific Limited)

The Shell oil company is another prominent customer that plans to buy LNG processed at the Sonora plant. Shell and MPL signed their third 20-year LNG supply agreement in March. 

Ivan Van der Walt, CEO of MPL, said that his company is “delighted” with the Zhejiang deal, adding that “LNG is an important pillar to China’s energy security needs and its underlying green policy ambitions.”

Xiqiang Chai, Deputy General Manager at Zhejiang Provincial Energy, agreed that the agreement is “an important step in further diversifying our energy supply portfolio and strengthening Zhejiang Energy’s natural gas industry.”

Zhejiang Provincial Energy Group is one of China’s government-backed city gas distributors, now competing on the global market. It owns a 51% stake in an LNG terminal in Wenzhou, on China’s eastern coast, and holds a 20-year supply agreement with Exxon Mobil.

Natural gas pipeline
AMLO has said that a new pipeline to be built by Mexico Pacific would funnel U.S LNG to Sonora for processing, but it is not yet clear if the pipeline is still in a planning phase or will even be built. Existing pipelines could do the job. (Depositphotos)

Chinese LNG importers have been racing to sign contracts with producers, including in Qatar and the U.S. in recent months, after LNG prices in Asia reached record highs.

MPL’s Saguaro Energía will have a production capacity of 14.1 million metric tons per year. It has access to the nearby Permian Basin, which straddles the U.S. states of Texas and New Mexico and contains more than 600 million cubic feet of natural gas resources.

The company boasts that the Saguaro plant offers “the lowest landed price of North American LNG into Asia,” and “a significantly shorter shipping route, avoiding Panama Canal transit risk for Asian markets.”

The construction of the plant was announced by President López Obrador last year, who said it represented a US $2.5 billion investment in Mexico. In May 2023, López Obrador said that MPL is now planning to invest US $14 billion in a natural gas pipeline and liquefaction plant in Sonora, although the details of this plan remain unclear and unconfirmed by MPL.

With reports from Reuters and Gas World

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