With the Russia-Ukraine war pushing Europe into competition with ever-hungry Asian economies, a host of new LNG export facilities are ramping on the U.S. Gulf Coast to feed growing demand abroad. However, an opportunity exists on the North American West Coast to directly target Asian markets. With ample pipeline capacity to the U.S.-Mexico border and cheap Permian gas desiring an end market, Northwest Mexico is one area poised to potentially fill this niche. If sufficient pipeline infrastructure can be put in place within Mexico itself, these proposed facilities could collectively become a significant driver of U.S. gas exports to Mexico.
The current list of proposed LNG facilities in Mexico can be divided into three tiers based on the likelihood that each facility reaches FID.
Tier A Facilities – Energía Costa Azul LNG I & Altamira FLNG
The only major LNG facility within the country currently under construction, Costa Azul phase one is expected to come online in the summer of 2025. Historically an LNG import terminal, the complex is transitioning to enable an export capacity of 0.43 Bcf/d. The project will be fed by TC Energy’s North Baja pipeline out of California, which is currently adding compression to accommodate larger volumes.
Altamira FLNG is also currently under construction and on track to be shipped to its proposed home off the coast of Tamaulipas with the aim of beginning operations this coming summer. Though only boasting a capacity of 0.18 Bcf/d, this type of modular, small-scale operation can tap into existing infrastructure on the Sur de Texas pipeline, thus enabling a faster turnaround than larger facilities.
Tier B Facilities – Mexico Pacific LNG I
While yet to reach FID, Quantum Energy’s Mexico Pacific holds SPAs for nearly all of the 1.25 Bcf/d of capacity associated with its two initial trains and expects a 2027 ISD. However, current pipeline infrastructure within Sonora and Chihuahua would only allow one train to run at full utilization. Heavily associated with the project is ONEOK’s proposed Saguaro Connector, a pipe which would flow from Waha to the Chihuahuan border and is one means of alleviating this midstream crunch. Still, for the Saguaro Connector to be utilized, another yet-to-be-announced pipeline within Mexico would need to be constructed from the U.S. border to the export facility.
Tier C Facilities – The rest of the pack
A smattering of other LNG export facilities and future expansions have been proposed over the past several years. However, supply-side solutions are needed for any of these projects to reach fruition. Due to the often-beleaguered midstream environment in Mexico, the further one gets from the U.S. border and Permian gas, the less reliable the supply needed to feed these facilities becomes. So, while a facility like Vista Pacifico does hold potential due to there being open capacity on currently operational pipelines, BTU Analytics is less bullish on projects like Salina Cruz and Amigo due to a lack of existing infrastructure and their being farther downstream.
While BTU Analytics holds reservations around many of these proposed facilities, their potential construction poses significant upside to gas demand within Mexico. As incremental power and industrial demand within the country have been slow to materialize in recent years, these LNG projects could pick up the slack. Ultimately, however, Mexican LNG export capacity and its impact on U.S. exports are heavily dependent on additional pipeline buildout within Mexico. Be sure to check out BTU Analytics’ Henry Hub Outlook for our latest views on gas dynamics within Mexico and how they will affect U.S. exports over the next several years.