New Fortress LNG project offshore Mexico nears first export amid US permitting freeze

The White House's recent moratorium on issuing new LNG export permits sent shockwaves through the sector, casting a cloud of regulatory risk over projects that need the approvals or will need existing permits extended in order to get built.

Several projects yet to reach a final investment decision face the prospect of delay because of the permitting freeze, which is pending a policy review expected to last through the November presidential election. Others could fall off the board altogether.

But in terms of physical flows of LNG, the most near-term consequence of the policy development could be off the coast of Altamira, Tamaulipas state, Mexico, where US-based New Fortress Energy is preparing to export its first LNG cargo from a relatively small floating export terminal.

The White House pause is unlikely to stop the 1.4 million mt/year Altamira LNG project, but it stands to affect where exports from the facility can be delivered, S&P Global Commodity Insights analysts said.

"We expect that the NFE Fast Altamira project will continue to progress given that it is already under construction," Ross Wyeno, director for LNG analytics at S&P Global, said Jan. 29.

The authorizations that the Biden administration halted are issued by the US Department of Energy and enable projects to export LNG to countries that lack free trade agreements with the US. The more than $1 billion Altamira LNG project needs the non-FTA approval because it relies on US feedgas.

Because non-FTA countries make up most of the global LNG import market, getting the approvals from DOE is typically critical for a project to secure financing and advance to construction.

But New Fortress has a permit in hand to export LNG to countries that do have free trade agreements with the US, or FTA countries, which include places like Nicaragua, where New Fortress is developing an LNG-to-power project.

"Despite the lack of non-FTA export approval, NFE will likely send the LNG produced to a limited number of Caribbean buyers, which have free-trade agreements with the US and, coincidentally, are already being supplied by NFE," Wyeno said.

Export destinations

As of November 2023, New Fortress said it had already introduced gas to the project. The developer was targeting the first LNG export at Altamira LNG by the end of 2023. But exports had yet to begin as of Jan. 29, according to S&P Global Commodities at Sea data, which also showed the floating export vessel did not have any significant volumes on board.

New Fortress did not respond to a request for comment Jan. 29.

But the same day, the developer said it received a ruling from US Customs and Border Protection that will give it more options for where it could deliver its LNG.

New Fortress said the ruling confirmed that transportation of LNG from the Altamira project can be sold and delivered to US locations, including Puerto Rico, "a key downstream market for the company," without violating a century-old law that otherwise restricts imports of US LNG at US ports.

The law is the 1920 Jones Act, which requires all goods shipped between two US ports to be carried on ships that are US-built and US-flagged, with majority US owners and crew. The US does not have any LNG tankers that meet the requirements of the Jones Act.

"We are extremely pleased to receive this ruling for our FLNG facility since it not only supports one of the company's largest projects but also supports the people of Puerto Rico," New Fortress CEO Wes Edens said in a statement.

US Customs did not immediately respond to a request for comment.

Development approach

New Fortress followed a different development path by deciding to start building while engineering and design work was ongoing. Altamira is the first of what New Fortress calls its Fast LNG units, which it pitched as a way to meet global demand for LNG on a faster timeline and at a lower cost than it takes to build new onshore LNG export capacity.

If three trains that New Fortress has discussed building at Altamira are all built, the project would still be less than half the capacity of a typical new terminal to advance to construction in North America.

Overall, the White House pause puts at risk some 153.7 million mt/year of proposed nameplate export capacity that is actively being marketed in the US and Mexico, according to S&P Global analysts. Prior to the moratorium, S&P Global forecast 23.7 million mt/year of final investment decisions in 2024, S&P Global analysts said, including 5 million mt/year of capacity in Mexico that needs DOE approval because it would rely on US feedgas.

"All will be postponed until at least 2025," the analysts said.