Mexico floating LNG terminal gives new avenue for US exports

Nasdaq-listed NFE inaugurated its floating LNG export terminal, in Mexican waters offshore Altamira, not far above Tampico. The molecules actually originate in Texas, and are piped down via the Valley Crossing Pipeline in Texas and then farther south via, the Sur de Texas-Tuxpan pipeline, and then treated and processed.

The terminal, dubbed FLNG1, utilises the “Fast LNG” design which NFE describes as: “an offshore natural gas liquefaction facility built on platforms. It all starts at the shipyard, where we build our standardised, modular liquefaction units.” NFE explains further that: “the LNG is transferred from the facility to a floating storage unit (FSU) – which is cheaper, faster, safer, and better for the environment than land-based storage. When it’s ready for shipment, the LNG is transferred from the FSU to an LNG tanker.”

At this terminal, the floating storage is provided by Energos Penguin 160,683 cu metre, 2014-built, in the fleet of Energos Infrastructure now totally owned by investment funds under the Apollo Global umbrella following NFE’s sale of a minority stake to the fund packager earlier this year.

As the Altamira terminal was nearing completion, NFE also had hinted at an intention to send LNG cargo to Puerto Rico, where it has constructed a regasification terminal in San Juan, against a backdrop of squabbles with various regulators, and has contracts to supply gas to local power companies.

Related:NFE’s LNG shipments into US won’t violate Jones Act

Importantly, January 2024 saw a favorable ruling for NFE, with the company saying that Customs and Border Protection (CBP), “has issued a ruling confirming that the transportation of LNG produced at the Company’s FLNG facility located offshore Altamira, Mexico by non-US qualified vessels would not violate the Jones Act….As a result of this ruling, NFE is now able to sell and deliver LNG produced at its FLNG facility located offshore Altamira, Mexico to US locations, including Puerto Rico. Puerto Rico is a key downstream market for the company.”

At least one equity analyst following NFE, Chris Robertson from Deutsche Bank Securities, had offered a cautious outlook about prospects for moving cargo into Puerto Rico, writing, in late July, about: “expectations that volume growth into Puerto Rico will take longer than expected.” The Altamira terminal’s initial cargo, trans-loaded in mid-August onto Energos Princess (138,158 cu metre, 2003-built), was, instead, bound via the Panama Canal for La Paz, Mexico (in Baja California), where NFE has a terminal.

Now, the outlook has brightened for additional destinations for LNG out of Altamira, as NFE received a permit from the Department of Energy (DOE) allowing exports for LNG produced at the Company's Altamira FLNG 1 liquefaction asset. This authorisation is described as a “non-FTA permit”, indeed the first issued to an LNG export terminal since the “temporary pause” on approvals of new LNG export facilities (and non-FTA permits) issued by the Biden administration, in January, 2024.

Related:New Fortress Energy Brazilian LNG terminal begins operation

This order was subsequently blocked, in a victory for potential exporters predominantly in Louisiana or Texas, in early July, after multiple states filed a lawsuit with the a US District Court (for the Western District of Louisiana- encompassing gas exporters in Cameron/ Lake Charles) challenging the administration’s action.

Under the “non-FTA permit”, up to approximately 1.4 million tonnes of LNG exports annually over a five-year period. In a release, NFE said, “our FLNG 1 asset is now able to export LNG to markets and customers worldwide.” While Mexico, the recipient of the first cargo does have a Free Trade Agreement with the United States (where the gas originates, hence DOE jurisdiction applies), many potential LNG cargo recipients do not.

Resources- US Dept of Energy evaluation of NFE application:

https://www.energy.gov/fecm/articles/nfe-altamira-flng-s-de-rl-de-cv-fecm-docket-no-22-110-lng

https://www.energy.gov/sites/default/files/2024-08/ord5156_new.pdf