LNG

Iberdrola, the Spanish utility company and former major liquefied natural player that sold most of its LNG portfolio to Pavilion Energy of Singapore in 2019, said it had agreed to sell 13 mostly gas-fired power plants in Mexico for $6 billion to the Mexican government.

The Mexican President Andrés Manuel López Obrador praised the deal with Iberdrola as a “new nationalization” of the electricity market in Mexico.

The Chairman of Iberdrola, Ignacio Galán, and Mexico’s President López Obrador, announced the deal after a meeting.

Iberdrola said the sales agreement was signed with an entity called Mexico Infrastructure Partners and involved 8,400 megawatts of capacity from 12 gas-fired plants and one 103 MW wind asset called La Venta III.

Iberdrola Chairman Galán said the Spanish utility was still committed to advancing the development of renewable energy in Mexico.

Strategy

“Iberdrola confirms its commitment to Mexico by reaffirming its leadership as the leading private generator of renewable energy with the backing of the Federal Government to continue operating its assets under market conditions and drive the energy transition in the country,” Galán explained.

“In addition, Iberdrola Mexico will continue to serve its existing customers and both parties will work together to try to resolve the various disputes that have arisen in the country in recent years,” the Iberdrola Chairman added.

Leftist President López Obrador had previously compared the attitudes of Iberdrola and several other companies to those of conquerors, a reference to the Spanish Conquistadors who had invaded South America and Mexico in the 16th Century.

Iberdrola had been a major LNG market participant until the 2019 transaction with Pavilion Energy when Iberdrola’s LNG assets were sold as part of the Spanish utility’s €3.5Bln ($3.8Bln) “non-strategic asset rotation” plan.

Mexico itself is a major importer of US pipeline natural gas as well as LNG and also has plans to be an LNG exporter.

New policy

The Mexican President said that the sales agreements for the 13 power plants allowed progress to be made on the implementation of Mexico's “new energy policy” for the future.

The transaction with Iberdrola gives the Mexico’s state-owned power company, Comisión Federal de Electricidad (CFE), or the Federal Electricity Commission, majority control over the electricity market.

“This means we're rescuing the Comisión Federal de Electricidad and this is a new nationalization of our electric industry,” stated López Obrador.

López Obrador added that the acquisition would take CFE's power generation holdings to almost 56 percent of Mexico's total, up from about 40 percent.

A statement said that the deal was expected to be completed within the next five months. 

The US Government is expanding federal oversight of natural gas pipelines nationwide affecting gas gatherings systems supplying feed gas to LNG export facilities and to domestic pipeline customers.

Sempra Energy said its Mexican subsidiary would move forward in 2020 with the Costa Azul liquefied natural gas export project in the northern Pacific Coast state of Baja California with permits already in place to re-export as LNG pipeline supplies imported from the US.

Sempra said a final investment decision to transform the existing Costa Azul import terminals into an export plant would come in the second quarter, pushed back from the first quarter, though all preparations were on track.

“The current economic environment may impact the schedule,” said Justin Bird, President of Sempra LNG. “However, the company remains confident in the long-term demand for LNG,” added Bird.

Sempra subsidiary IEnova, or Infraestructura Energetica Nova SA as it is officially known, is overseeing the project.

Costa Azul will have its liquefaction capability constructed in two phases. 

The first part of the transformation of the plant will see the building of a single liquefaction Train to be located adjacent to the existing terminal and with capacity for 2.4 MTPA of exports.

The Mexican project has already signed three accords with French major Total and Japanese companies Mitsui & Co. and Tokyo Gas for the full export capacity of Phase 1 development at Costa Azul.

The Costa Azul venture has additionally received US authorizations for natural gas to be exported to Mexico and re-exported to Non-Free Trade Agreement countries. 

Costa Azul was the first LNG import terminal on North America's West Coast and was built in 2008 about 15 miles north of Ensenada and with bi-directional pipeline connects to the US.

The Costa Azul facility previously benefited from south-to-north flows on the North Baja pipeline. However, north-to-south flows on the West Coast now predominate.

Sempra’s IEnova unit continues to be a main natural gas pipeline developer in Mexico.

Among the projects, IEnova’s South Texas-Tuxpan pipeline is a crucial outlet for US natural gas to the southern Gulf Coast side of the country.

This pipeline is seen as fundamental to maintaining a reliable gas service in the southeast of Mexico with 2.6 billion cubic feet per day of capacity.

The pipeline crosses part of the Gulf of Mexico from Texas and was built at a cost of $2.5 billion. It is owned by IEnova and Canadian pipeline company TC Energy.

The South Texas-Tuxpan pipeline is inter-connected to the Valley Crossing Pipeline in Texas completed by Enbridge Inc., another Canadian company like TC Energy and based in Calgary.

The 168-mile Valley Crossing pipeline runs from the Agua Dulce hub in Texas to the Gulf of Mexico east of the port of Brownsville.