New Fortress Energy Inc. announced that it has finalized its agreements with Petróleos Mexicanos (Pemex), Mexico’s state-owned oil company, to develop and operate an integrated upstream and natural gas liquefaction project off the coast of Veracruz in Southeastern Mexico.
NFE will invest in the continued development of the Lakach field over a two-year period by completing seven offshore wells. In addition, NFE will deploy to the Lakach field its 1.4 MTPA Sevan Driller FLNG unit, which is currently undergoing conversion in a shipyard in Singapore, to liquefy the majority of the produced natural gas.
NFE anticipates the all-in cost of producing LNG at Lakach will be among the lowest in the world. The Lakach FLNG unit is one of five FLNG units NFE plans to deploy in the next two years, adding approximately 7.0 MTPA of incremental liquefaction capacity to the global market – more than half of the world’s total expected capacity additions during the 2023-2024 period.
Pursuant to the agreements, NFE will provide upstream services to Pemex whereby NFE produces natural gas and condensate in exchange for a fee for every unit of production delivered to Pemex. The fee is based on a contractual formula that resembles industry-standard gross profit-sharing agreements between the upstream service provider (NFE) and the owner of the hydrocarbons (Pemex).
NFE will produce natural gas in the Lakach field and will have the right to purchase, at a contracted rate, sufficient volumes for its FLNG unit, while Pemex will sell the remaining natural gas volumes and all of the produced condensate to its customers onshore.
Pemex discovered the Lakach deepwater natural gas field in 2007 and subsequently carried out significant exploration and development activities.
Pemex ceased allocating capital to the field and suspended further development amid oil price declines in 2014. Under the leadership of President López Obrador, the Mexican government has stated that completing Lakach is a matter of national interest.
NFE and Pemex believe the Lakach field will yield approximately ten years of production, with the possibility of significantly extending the reserve life if the nearby Kunah and Piklis fields are developed.
Coupled with these nearby fields, the area around Lakach has a total resource potential of 3.3 trillion cubic feet (Tcf) and comprises one of the most significant undeveloped offshore natural gas resources in the Western hemisphere.
The transactions are subject to customary terms and conditions. ■