Mexico Asks Sempra to Build Second LNG Facility in Return for Approving Permit

MEXICO CITY (Reuters) — Mexico’s government wants the local unit of Sempra Energy to build another export facility to help sell off excess natural gas in return for granting the energy infrastructure company a historic export permit, according to three people familiar with the matter. 

San Diego-based Sempra has signaled that its Mexican unit IEnova is close to obtaining the export permit for the gas liquefaction facility at its regasification terminal Energia Costa Azul (ECA), near the northwestern port of Ensenada.

However, the government this month asked IEnova to commit to another facility in the port of Topolobampo in the Gulf of California to help Mexico unload excess gas capacity before issuing the export permit, two of the people said.

The people spoke on condition of anonymity due to the sensitivity of the ongoing discussions, which could still lead to a prompt authorization of the permit. Reuters was not immediately able to establish details of the proposed plant.

The liquefied natural gas (LNG) export permit would be the first of its kind for a private company in Mexico.

One of Sempra’s top pending projects, ECA could be a lucrative outlet for U.S. natural gas in Asia, with an initial export capacity of some 3 million tonnes per annum of LNG.

Sempra’s Chief Executive Jeffrey Martin was among the business leaders to attend a July meeting between Mexican President Andres Manuel Lopez Obrador and his U.S. counterpart Donald Trump in Washington.

During the meeting, Sempra tweeted about the $1.9 billion it is investing in ECA, and brought the approval process to the presidents’ attention, stirring hopes it would soon be resolved, according to several people familiar with the matter.

On Aug. 5, Martin told a conference call he was optimistic Sempra would get the export permit from the Mexican energy ministry during the third quarter.

IEnova referred questions on this article to Sempra, which owns a controlling 66.4% stake in the Mexican firm.

A Sempra spokeswoman said the company looked forward to seeing ECA progress and was still working with the Mexican government to obtain the export permit.

“Across all of the Sempra businesses, we constructively engage with our stakeholders to see how we can meet the needs of the communities in which we operate, and ... we are continuing to do that with respect to our LNG projects,” she said.

Neither the Mexican energy ministry nor the president’s office responded to requests for comment.

 

Business Concerns

IEnova had previously discussed with the government the possibility of installing such a plant in Topolobampo, according to two of the sources. But having to commit before getting the export permit was not part of its plan, they said.

The request may fuel concerns about ease of doing business under Lopez Obrador, who has strengthened state influence over energy policy and argues that corruption in past governments skewed the energy market in favor of private interests.

Still, he inherited dozens of privately-funded infrastructure projects from his predecessor, including a U.S.-connected gas pipeline due to terminate in Topolobampo.

Lopez Obrador recently brought up the ECA in public, without mentioning the government is linking approval of the export permit to another gas export plant in Topolobampo, where IEnova is already building a liquid fuels terminal.

The final stretch of the Topolobampo pipeline is incomplete due to resistance from a local indigenous community.

However, Lopez Obrador said on Aug. 10 it was important to complete it since Mexico had signed agreements under the last administration to import U.S. gas.

Topolobampo “is where we can put a plant to handle gas and sell the (excess) gas to Asia,” he told a news briefing.

The government was therefore exploring whether a deal could be reached with IEnova to ship that gas to Asia, he said.

Related News

Related News

• Most Read
• Most Commented