Mexico’s Latest LNG Project Awaits First Cargo

Wednesday, 23 June 2021
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As part of a wider strategy to expand Mexico’s access to LNG and gas infrastructure, Mexico’s Federal Electricity Commission and LNG developer New Fortress Energy are looking to see the new Baja California Sul (BCS) terminal accept its first LNG delivery. 

The LNGC Castillo del Villalba has arrived in the area carrying an Atlantic LNG cargo but which it has yet to discharge.

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A supply crunch of pipeline gas earlier this year underscored the importance of LNG as an alternative even as imports remain on a downwards trend.

LNG Journal vessel-tracking data shows the LNGC Castillo del Villalba arrived offshore Puerto Pichilingue in La Paz, Mexico.

The port will be site to Mexico’s latest LNG terminal addition on the Pacific coast.

Although relatively small in size, the terminal forms part of a wider strategy driven by Mexico’s Federal Electricity Commission (CFE) to expand the country’s network of gas-fired power stations. 

LNG an important alternative

Mexican LNG demand has declined since June 2019 as pipeline connectivity to neighbouring United States continues to expand.

However, Mexico’s pipeline rollout has in the past been slowed by technical issues whilst earlier this year Mexican gas imports from the United States were curtailed due to extreme cold in Texas, which even called for the brief revival of the mothballed Altamia LNG terminal to stave off disaster.

Waiting to deliver

The Naturgy-controlled conventional LNG carrier Castillo del Villalba is carrying an Atlantic LNG cargo of c. 0.04mmt, according to our data and calculations.

The vessel departed the BP-operated LNG plant on Trinidad and Tobago on 12 June. 

However, the Castillo del Villalba has yet to discharge its cargo, with our tracking data not indicating an ongoing ship-to-ship cargo transfer.

The maximum depth of Puerto Pichilingue’s anchorage is roughly 12 metres whilst in-harbour it is approximately 10.5 metres, according to a port database.

Based on the Castillo del Villalba’s partial loading given both the intended recipient terminal and our calculations, the vessel’s current draft may just be within the limits of Puerto Pichilingue.

Up to eight shipments per year

The Baja California Sur regional government announced the construction of the US$192 million LNG terminal at Puerto Pichilingue in July 2019.

Developed by New Fortress Energy, a United States developer and operator of LNG energy projects with a portfolio focussed on the Caribbean and Latin America, the new plant is contracted to supply feedgas to two power plants in the northwest of the state. The supply deal was underwritten by CFE.

Under the agreement, New Fortress Energy will provide the equivalent of an estimated 250,000-500,000 gallons of LNG per day to the CTG La Paz and CTG Baja California Sur open-cycle power plants.

This would peg the terminal’s annual LNG throughput at roughly  0.16-0.32mmt, or the equivalent of up to eight cargo deliveries (depending on vessel size and load level), according to our calculations.

New capacity

CFE has been working on plans to expand gas-fired generation capacity in the state of Baja California Sur, including a 327 MW combined-cycle plant it hopes to see enter service in 2024.

In March this year, the Commission launched an EPC tender for the power project.

Plans for five additional combined-cycle power plants elsewhere in Mexico are also underway.

Sweeping new powers suspended

CFE has been pushing to expand state-controlled power capacity alongside amendments to the Electric Industry Law designed to provide Commission-operated plants priority in the electricity dispatch order at all times.

The amendment would also release CFE from existing obligations to purchase power via competitive auctions and enable the modification or early termination of offtake agreements between CFE and independent power producers, according to a fact sheet by EY Mexico.

The amendment was provisionally suspended on environmental grounds by a federal court in March.

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