What Biden’s LNG export pause means for 2 Mexican projects

US President Joe Biden’s decision to pause permits for new liquefied natural gas (LNG) export applications is causing uncertainty in Mexico. 

Two major projects to export LNG, with input from the US, to Asia and Europe are underway in Mexico.

The first concerns the US$14bn Saguaro Energía facility that Mexico Pacific is building in Puerto Libertad, Sonora state, and the second is the US$1.3bn first stage of the Altamira FLNG project off Tamaulipas state, led by US company New Fortress Energy.

Construction at Saguaro Energía is planned to start this quarter, while Altamira should come online this month.

Asked for comment by BNamericas, New Fortress did not immediately reply, while Mexico Pacific said the implications of the measure are still being analyzed. 

The Biden administration’s decision centers on US projects only, but the vagueness of its extent outside the country is still causing uncertainty, according to Pablo Zárate, senior managing director at FTI Consulting.

“Although the projects in Mexico are not explicitly mentioned, there are effectively general questions about any permits that may remain pending for the export of gas to Mexico and the implications that this may have,” he told BNamericas.  

“While it is not the administration's objective, it is obvious that the projects that are occurring outside the US are also affected by the climate of uncertainty [this announcement] is generating and I hope that the pertinent clarifications are made as soon as possible.”

New Fortress will likely not face major problems, given how advanced work on its facility is. But the company was mulling building a second terminal at Altamira port, and it remains unclear if these plans can advance. 

Meanwhile, Mexico Pacific received US Department of Energy (DOE) authorization to export to FTA and non-FTA countries in 2019, so in theory its project should not be affected. The permits will reportedly expire at the end of 2025. 

"We're managing to start full activities in the first quarter," the firm’s local representative, Alberto Alonzo, told BNamericas in January. "People are working on-site in Puerto Libertad already. So, there's activity now, but I tell you officially that the final investment decision for the first two trains will come in the first quarter of 2024 and for the third train in the first half of 2024."

It is unclear how the permitting pause impacts pipeline export projects.

The freeze

The Biden administration's review of permitting will take months, US energy secretary Jennifer Granholm said at a conference, adding that US allies and Europe and Asia will not be affected by the measure, even if they do not have free trade agreements with Washington, as their dependence on gas can be subject to exemptions under the national security pretext. 

The US is the world’s biggest LNG exporter, with 14 billion cubic feet per day (Bf3/d) in current operating capacity and 48Bf3/d in total authorizations approved by DOE to date, according to the entity. 

Natural gas is Mexico’s main fuel source, accounting for 48% of power generation, and 70% is imported from the US, according to a report from the UN Economic Commission for Latin America and the Caribbean. 

In a statement, Biden said the freeze aims to strengthen environmental policy. “During this period, we will take a hard look at the impacts of LNG exports on energy costs, America’s energy security, and our environment. This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time,” he said.