Pemex and New Fortress abandon deepwater gas project

The Mexican oil company Pemex and the American New Fortress Energy (NFE) terminated an agreement they had signed almost a year ago to produce natural gas in the Lakach field, in deep waters of the Gulf of Mexicoaccording to two sources with knowledge of the matter.

It was planned that hydrocarbon production would begin in the first quarter of 2024 in Lakach, located 90 kilometers from the Port of Veracruz, and which has a reserve of around 900,000 million cubic feet of gas, according to Pemex last year. to sign the contract.

The decision to terminate the service contract early was made by Pemex last month after NFE tried to impose conditions that the state-owned company considered unacceptable, according to one of the sources.

Pemex plans to move forward with the project and is in talks with other companies that could join. However, they did not give names of the interested companies.

The project with NFE involved the reactivation of a development plan for Lakach suspended in 2016 after the investment of some US$ 1.4 billion by Pemex during administrations prior to those of President Andrés Manuel López Obrador.

The agreement committed NFE to complement that investment by contributing an additional US$1.5 billion. Pemex, for its part, planned to sell 190 million cubic feet per day (cfd) of gas to NFE and the remaining 110 million cubic feet per day (pcd) to be produced would be supplied to the domestic market.

One of the sources said NFE wanted the gas at an extremely low price, but did not provide details. The other source said Lakach had become too expensive for NFE and noted that it would be challenging for Pemex to move forward with the project.

Shortly after the deal was announced, many analysts doubted it would be viable, arguing that NFE might not have enough financial capital to undertake it and Pemex’s lack of expertise in deepwater production.

In October of last year, the Mexican oil sector regulator, the CNH, approved Pemex a modified plan to develop the controversial project, at a time when the state giant was facing, as it is currently, huge outstanding payments on financial debt and suppliers.

Last year, CNH and Pemex officials had been at odds over how to develop Lakach and other large fields.

In an initial review, regulator officials found that drilling costs in the plan drawn up by Pemex were too high and production was overestimated. It finally got the green light from the regulator after Pemex modified the plan.

Last week, New Fortress Energy revealed it was studying establishing a liquefied natural gas (LNG) export facility in Mexico that would be an onshore complement to its offshore project.

Source: Reuters