Mexico to Develop New Offshore Natural Gas Field Following PEMEX/NFE Agreement

Last week,?Petroleos Mexicanos?(Pemex) (Mexico City) and?New Fortress Energy?(NASDAQ:NFE) (NFE) (New York, New York) announced they had closed a deal to develop and operate the Lakach deepwater natural gas field, one of the largest non-associated natural gas assets in the Gulf of Mexico.

Discovered by Pemex in 2007, the field is located off the coast of Veracruz, in the south of Mexico. Following exploration works, the Mexican company halted development efforts due to international energy prices, according to the NFE statement, though this agreement offers new opportunities to increase non-associated natural gas production in the country.

NFE is expected to complete seven offshore wells in the next two years, and it will deploy its Sevan Driller floating liquefied natural gas (FLNG) unit.

This gas field is expected to produce for 10 years, with the possibility of extending its reserves with the development of the Kunah and Piklis fields near Lakach. The three of fields have an estimated reserve of 3.3 trillion cubic feet.

"We are pleased to finalize our strategic partnership with Pemex, which strengthens our commitment to long-term operations in Mexico and we believe demonstrates the substantial value of our integrated natural gas infrastructure business model," said Wes Edens, chairman and chief executive officer of NFE. "This arrangement represents the first of what we consider to be an ideal formula for the deployment of NFE's FLNG units to stranded gas plays around the world--one that combines gas for domestic use with low-cost supply for LNG export into global markets."

According to the NFE statement, the project is supported by President Andres Manuel Lopez Obrador, who has maintained steadfast support for Pemex.

Mexico relies heavily on natural gas imported from the U.S. Any new natural gas developments could help the country lift its current production and meet more domestic demand. In 2021, the U.S. exported a record 5.9 billion cubic feet of natural gas to Mexico, according to the US Energy Information Administration.

Pemex has seen its natural gas production decrease in the last few years, although its non-associated gas output has climbed throughout that same time. In 2017, Pemex was producing some 5 billion cubic feet per day (including output from partners), of which about 20%, or 1.01 billion cubic feet per day, were from non-associated assets. By 2021, the company was producing 4.7 billion cubic feet per day, of which 22%, or 1.06 billion cubic feet, came from non-associated gas fields.

The new project would allow Pemex to produce more natural gas. Pemex Chief Executive Officer Octavio Romero Oropeza said the partnership with NFE "will enable Pemex to efficiently leverage our domestic natural gas resources, fulfill Mexico's security of supply targets, and facilitate gas-fired power infrastructure development in the region."

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