Watching The World: Mexico's big changes

Feb. 22, 2010
Mexico's oil and gas industry is in for some very big changes, especially in the amount of LNG it plans to import in the near future.

Mexico's oil and gas industry is in for some very big changes, especially in the amount of LNG it plans to import in the near future.

The Mexican government recently unveiled that future with its annual natural gas demand forecast, which estimates that its LNG imports will spiral by 60% in 2010 alone.

Altogether, Mexico's imports of LNG will average 586 MMcfd this year, up from 367 MMcfd in 2009.

But the story does not stop there, as government estimates see Mexico's gas demand rising to 11.2 bcfd in 2024 from 7.204 bcfd in 2008, while the country's production will rise to 8.7 bcfd in 2024.

What does Mexico plan to do about the 2.5-bcfd shortfall? Experts say that brings LNG imports into play, and a number of international firms have already positioned themselves for the expected business.

Enter STX

Among them is South Korea's STX Heavy Industries, which last week said it won a $700 million order to build an LNG terminal at the Port of Lazaro Cardenas on Mexico's west coast.

Under a joint development agreement with Mexico's Group Indi, STX will be in charge of design, construction, and trial operation of the 3.8 million tonne terminal, with construction to begin early next year and finishing in the latter half of 2014.

According to IndiEnergy, an affiliate of Group Indi, the agreement also calls for the construction of two 200,000-cu m LNG carriers in addition to the regasification facility—with the imports all headed for Mexico's state-owned Petroleos Mexicanos.

One STX source said the project is a starting point "to expand our business in the Latin American market," adding, "We will position as a global player in the Latin American plant market."

Plant market?

What is meant by the plant market? Well, it's a reminder of the recent agreement by Mitsui and Tokyo Gas to buy five gas-fired power plants and a small related gas pipeline in northeastern Mexico from Spain's Gas Natural.

In December, the Spanish group announced the $1.23 billion sale which includes several thermal plants: Anahuac (495 Mw), Lomas del Real (495 Mw), Valle Hermoso (500 Mw), Electricidad Aguila Altamira (495 Mw), and Saltillo (248 Mw).

The entire output of the power plants is contracted to state Comision Federal de Electricidad under 25-year power purchase agreements, out to 2026-30.

No one needs reminding that Mitsui owns 25% of the 500 Mmcfd Altamira LNG terminal on Mexico's east coast, while a Mitsui-led consortium 2 years ago won a tender to build the 500 MMcfd Manzanillo terminal on Mexico's west coast.

Mitsui and Tokyo Gas are said to have high hopes they will reap stable profits in Mexico, which, spurred by its economic development, has been experiencing a rising demand for power and for the gas that runs the turbines.

Yes, indeed. Big changes are coming to Mexico.

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