Shell has signed a deal with Mexico Pacific to take 2.6 million tonnes per year of LNG from the first two trains of the project, which will be in Mexico’s state of Sonora.
The Mexico Pacific LNG project will have three trains at Puerto Libertad, in Mexico’s west. The facility will have combined production of 14.1mn tpy. It should start producing in 2026.
“We are delighted to welcome Shell as a foundation customer at our anchor LNG facility”, said Douglas Shanda, President and CEO of Mexico Pacific.
“Their recognition of the advantages our location offers, including access to low-cost Permian gas, avoidance of the Panama Canal to ensure a shorter shipping distance to Asia, and lower landed pricing, demonstrates the value of West Coast North American LNG.”
The company expects to reach final investment decision (FID) in the second half of the year. Press reports have suggested it will opt to proceed with the first two trains at the same time.
Shanda joined Mexico Pacific from Cheniere Energy.
Shell struck the deal via its Shell Eastern Trading subsidiary. It will buy the LNG on a free on board (FOB) basis for a 20 year term.
Shell executive vice president of energy marketing Steve Hill said energy security was “paramount” for the world.
“The demand for LNG is set to continue to rise with further LNG required to ensure security of supply and progress the energy transition,” he said. “We look forward to continuing to work with Mexico Pacific as they advance to bring more LNG online.”
Mexico Pacific LNG has said it could scale up to 28mn tpy. Given its proximity to Asia, the operator has said delivery costs to Asia are 45% cheaper.
Gas for the Mexican project will come from the Permian Basin. There are existing pipelines connecting the site to the Waha and Henry Hub benchmarks.
China’s Guangzhou Development Group (GDG) has signed up as an offtaker. The Chinese company will take 2mn tpy from Mexico Pacific LNG on a 20-year term.
Mexico Pacific LNG will use technology from ConocoPhillips and Bechtel, under a deal signed in October 2021. Conoco noted that this would allow it to provide lower carbon LNG and, ultimately, aspire for carbon neutrality.