LNG

New Fortress Energy, the US LNG production and import projects developer, said that it finalized agreements with Mexico’s Federal Electricity Commission (CFE), including plans for an offshore production hub near the Gulf of Mexico import terminal at Altamira.

NFE said that its Mexican accords were fully supported by Mexican President Andrés Manuel López Obrador and by Manuel Bartlett, the Chief Executive of the CFE.

The New York-based company noted that the final versions of the agreements would be signed at a ceremony on November 3 in Mexico City.

The NFE-Mexican accords cover the expansion and extensions of NFE’s supply of natural gas to multiple CFE power generation facilities in the northwest Mexican state of Baja California Sur.

IT additionally includes the selling of NFE’s 135-megawats La Paz power plant to CFE as well as the new FLNG hub off the coast of Altamira in the state of Tamaulipas.

For the LNG production hub, NFE said that the Mexican side through the CFE would be supplying the requisite feed-gas to multiple NFE FLNG units using CFE’s existing and under-utilized pipeline capacity.

Strategic alliance

“We are pleased to complete these agreements and expand our strategic alliance with CFE, which we expect to result in the delivery of our first FLNG unit by mid-2023 and enable the construction of a new LNG hub off the coast of Altamira,” explained Wes Edens, Chairman and CEO of NFE.

“I look forward to seeing President López Obrador next week, appreciate his continued support, and value the opportunity to demonstrate our commitment to producing cleaner, cheaper and more reliable energy for Mexico and the world,” declared Edens.

NFE commenced commercial operations in July 2021 at an LNG regasification terminal in the port of Pichilingue in Baja California Sur.

The US company noted that the terminal, which features NFE’s proprietary “ISOFlex system”, is positioned to supply natural gas to CFE’s generation facilities in the otherwise resource-stranded region.

For the Altamira operations in the Gulf of Mexico, NFE and the CFE are fully collaborating on the creation of the new FLNG hub.

Pursuant to the now finalized agreements, NFE will deploy multiple FLNG units of 1.4 million cubic metres capacity each that utilize CFE’s existing firm pipeline transportation capacity on Sur de Texas-Tuxpan Pipeline to deliver feed-gas volumes to NFE.

The Sur de Texas-Tuxpan Pipeline is operated by Canadian company TC Energy.

NFE’s first FLNG unit, which is under construction at the Kiewit Offshore Services shipyard near Corpus Christi in Texas, is currently expected to achieve mechanical completion in March 2023.

“As part of the agreements, CFE would share in the production and marketing of a portion of the LNG volumes from the new Altamira offshore FLNG hub,” said NFE.

Petróleos Mexicanos (Pemex), the Mexican oil and gas company, is currently struggling to emerge from the economic slowdown amid widening losses at a time when several LNG export projects are moving forward in the country.

Mexico, a future LNG exporter to Asia with three plants being developed on the Pacific Coast, has revealed plans that are a hidden part of the future energy policies of many resource-rich nations that it will stop exporting oil in 2023 and keep the oil for itself to guarantee fuel supplies.

Petróleos Mexicanos (Pemex), the Mexican oil and gas company, is currently struggling to emerge from the economic slowdown amid widening losses and tumbling revenues at a time when several LNG export projects are moving forward in the country.

Petroleos Mexicanos (Pemex), the Mexican oil and gas producer, appears to have nothing left in its locker to cope with the current global crisis and may have to call on US credit lines for its pipeline natural gas and LNG imports after its corporate and state ratings were reduced.

The socialist government of President Andrés Manuel López Obrador, which had made boosting Pemex’s declining output one of its core objectives, is now being squeezed on the financial front after reversing previous administration’s policies and keeping private companies out of the energy business.

Before then crude price slump and coronavirus impacts Pemex had produced 1.7 million barrels a day of crude on average in January 2020, below government forecasts and just half of peak production of 3.4M barrels in 2004. 

Analysts said that with oil prices where they are, 75 percent of Pemex’s oil and gas fields will only generate losses if output is not cut.

They added that the risks goes well beyond Pemex as the Mexican government relies on the energy company to fund 18 percent of the national budget with its oil sales.

US company S&P Global Ratings has now downgraded Pemex and its subsidiaries PMI Trading Ltd., PMI Norteamerica SA and MEX Gas Supply and conducted similar action on the sovereign credit rating.

“Recurring government aid to Pemex over the last 12 months reinforces our assessment of an almost certain likelihood of extraordinary government support if the company were to run into financial difficulties,” explained S&P Global.

“Therefore, the ratings on Pemex continue to mirror those on the sovereign debt,” it added.

López Obrador was aiming to build a large new oil refinery in an $8 billion project with which he hoped to divert Mexican oil exports to domestic use and cut dependence on US fuel imports.

The Mexican President had reversed the policies of the previous administration that had decided to gradually cut Pemex loose from state funding for its monopoly business.

Some of the refinery contracts were awarded in July 2019 for the project in the southern port of Dos Bocas to companies including US LNG and energy engineers KBR Inc., Fluor Corp. as well as Samsung Engineering of South Korea and several Mexican companies.

The refinery in the President’s home state of Tabasco was scheduled to process 340,000 barrels per day of Mexico’s benchmark grade, Maya heavy crude, and to be completed by 2022. 

S&P Global downgraded its foreign currency and local currency ratings on Pemex to “'BBB” and “BBB-plus” from “BBB-plus” “A-minus”  respectively, and maintained a negative global scale ratings outlook after similar action on Mexican government debt.

“Lower oil and natural gas prices anticipated over the next two years will jeopardize the execution of Pemex’s business plan, because weaker cash flow will limit the ability to fully fund its multi-annual capital investment needs,” explained the S&P report.

“In this context, we see limited room for Pemex to improve its very weak credit metrics any time soon,” stated the US firm.

“In addition, low cash flow generation prospects and an extended period of adverse financing conditions could gradually tighten the company's liquidity,” it added.

“Therefore, we have revised downwards our stand-alone credit profile (SACP) on Pemex to “CCC-plus” from “B-minus,” said the report.

“The negative outlook on Pemex mirrors that on the sovereign and reflects our view that the close relationship between the company and the sovereign will remain unchanged in the next couple of years,” S&P explained.

“Our assessment also captures the integral link between Pemex and the government, given its full ownership of the company and the high government involvement in all strategic decisions,” it added.

“We consider that our assessment has been reinforced over the last 15 months through recurring government aid to Pemex in the form of capital contributions, legal amendments to alleviate the company's tax burden, the monetization of certain assets, and close collaboration to deter fuel theft,” said the credit report.

“Another factor captured in our assessment is the reversal in Mexico's energy policy under the current administration, which repositions Pemex at center stage and curbs the participation of private players in the domestic energy sector,” added S&P.

The US ratings firm said it expect a “pronounced hit” to the Mexican economy with the combined shocks of the coronavirus in Mexico itself and in the US, its main trading partner, and lower oil prices.

“These shocks, while temporary, will worsen already weak gross domestic product (GDP) growth dynamics for 2020-2023 that reflect, in part, low private-sector confidence and poor investment dynamics,” it said.