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Mexico Pacific LNG: A New Export Era Anchored by Permian Gas
10/16/2023
Natural gas from the U.S. Permian Basin is set to be the primary source for Mexico's Pacific's Saguaro Energía LNG facility.
Located in Puerto Libertad, Sonora, the Saguaro Energía LNG export facility will feature three processing trains. The site is primed for potential expansion with plans for three additional trains of similar capacity. Its strategic Pacific Coast location offers a 55% shorter shipping route to Asia, providing significant savings and reduced carbon emissions.
- The facility will have three trains, each having a processing capacity of 5 million tonnes per annum (mtpa). Combined, they offer a nameplate capacity of 15 mtpa, equivalent to 2 Bcf/d.
- Plans are in place to add three more trains, each with a capacity of 5 mtpa.
- The facility will utilize low-cost gas from the Permian Basin, specifically from the Waha hub.
- Gas will be transported via a 253 km pipeline in the U.S. that connects to an 802 km pipeline in Mexico. Both pipelines can handle up to 2.8 Bcf/d of gas.
“The facility will connect the cheapest natural gas from the Permian Basin's Waha hub to the world's largest demand center, Asia,” Kruse said during a panel discussion at Hart Energy’s Energy Capital Conference.
Economic Implications
Tyler Kruse, Vice President of Corporate Finance at Mexico Pacific Ltd., emphasized the advantages of sourcing cheaper natural gas from the Permian Basin's Waha hub. Stifel Financial Corporation projects an 8% LNG growth by the decade's end, underscoring the project's potential.
The Mexican government is in favor of the development of the LNG infrastructure. While concerns about drug cartels have been addressed, they are not deemed a major threat.
Investment & Partnerships
A final investment decision on the Saguaro Energía LNG facility is forthcoming, with operations anticipated to commence by 2027. Major energy players, including Shell, Exxon Mobil, and ConocoPhillips, support the facility. Contracted clientele includes Guangzhou Gas and Zhejiang Energy from China.
About Mexico Pacific LNG Terminal:
Mexico Pacific's Saguaro Energía LNG facility aims to bridge the supply-demand gap in the global LNG market. Located strategically, it ensures efficient transportation, tapping into the vast reserves of the Permian Basin. Their commitment to sustainability is evident with the reduced carbon footprint they offer compared to their Gulf Coast counterparts. The involvement of energy giants like Shell and Exxon Mobil further underscores the facility's significance in reshaping the global energy landscape.
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OXY has been the leader in Permian Basin production for the past five years. Currently, the Houston-based oil and gas company is deepening its presence in the basin with a $12 billion acquisition of CrownRock, adding over 94,000 acres in the Midland Basin and increasing its oil output by about 170,000 barrels per day. Occidental announced an increase in its proved reserves to 4.0 billion barrels of oil equivalent by the end of December 2023, up from 3.8 billion the previous year. Activities in the Permian largely fueled this rise. Occidental added approximately 303 million barrels through infill development projects as well as new discoveries and the further development of existing fields brought in another 153 million barrels.
TotalEnergies kicked off 2024 with a net income of $5.7 billion in the first quarter, marking a modest 3% increase from the same period last year and a 13% rise from the previous quarter. This growth occurred despite experiencing drops in both the volume and price of gas sales over the year and the quarter. Their adjusted net earnings, which exclude one-time or unusual items, were $5.1 billion. This represents a significant 22% decline compared to last year and a slight 2% drop from the last quarter. The company's earnings before tax, depreciation, and amortization reached $11.5 billion, while their cash flow from operations significantly decreased to $2.2 billion, falling by 58% from last year and a steep 87% from the previous quarter. TotalEnergies also recorded $644 million in impairments.
New Mexico leads the Rockies region in gas production and ranks as the sixth-largest in terms of active gas wells in the U.S. Last year, the state's gas well count slightly increased by 0.2% to 30,699, with new additions in both the northwestern San Juan Basin and the southeastern Permian Basin. Meanwhile, just to the north in Colorado, gas producers grew by a modest 0.1% to 30,322, primarily due to increased drilling activity in the DJ and Piceance basins. Wyoming saw a decline in its active gas wells by 3.7%, down to 17,006, with production mainly in Sublette, Sweetwater, and Converse counties reflecting stable or slightly reduced drilling activity. Utah also experienced a slight decrease of 0.2% in its number of gas wells, totaling 6,463. In Q1 2024, oil and gas industry activity in Oklahoma, Colorado, and northern New Mexico experienced a decline. This marks the fifth consecutive quarter of contraction in drilling and business activities within these regions. According to a survey that included responses from 33 firms operating in the Rockies, this downtrend is expected to continue over the next six months.