LNG developer gets Mexican government approval as investment decision nears

The Mexican government has authorized a key permit for US-based LNG developer Mexico Pacific for a proposed export facility on the country's Pacific Coast, Mexican President Andrés Manuel López Obrador said.

The development, also announced by Mexico's Energy Secretariat, could advance Mexico Pacific's plans to begin constructing the export project in 2022 in order to start exporting LNG as soon as 2026.

The project has "already been authorized," Lopez Obrador said in a June 3 Tweet.

Government officials had not yet issued the permit to Mexico Pacific Ltd., but the company expected to receive the permit "this week," MPL spokesperson Faith Parker said in a June 6 email.

The regulatory progress came at a time when the privately-held company has reported significant commercial momentum in support of the project. MPL executives said in March that the company had secured binding offtake agreements for about a third of the volumes it needs to cover the initial two trains of the project, which would be capable of producing 9.4 million mt/year of LNG, and that it was close to signing commitments for the remaining volumes. The deals included an agreement by China's Guangzhou Development Group Inc. to buy 2 million mt/year of LNG, subject to conditions that included MPL reaching a final investment decision on the project.

MPL on June 6 declined to comment on any further commercial developments, but it said it remains on track to reach a positive final investment decision in September amid rising anticipation that a new wave of US LNG export projects will advance to construction following a flurry of commercial deals in recent months.

Each train of the MPL project would be capable of producing 4.7 million mt/year. MPL has said it has permits for a third train of the same size. The project would use US feedgas to produce LNG from its site in Puerto Libertad, Sonora, about 125 miles south of the Arizona border on the north edge of the Sea of Cortez.

The proposed location on the Pacific Ocean has been a selling point of the MPL project. Tankers would be able to avoid the Panama Canal and reach East Asia in about half the time it takes for shipments from the US Gulf Coast. MPL, backed by private equity investor AVAIO Capital, has been marketing what it says will be "the lowest North American landed LNG price into Asia."

MPL has not disclosed the liquefaction fee it will charge, but it has said that it would not be similar to the ultra-low fees that some rival US developers have marketed in recent years. Executives in March said the LNG volumes in its recent deals would be delivered free-on-board, would include a fixed liquefaction fee, and would mostly be indexed to US Henry Hub and Waha gas prices.