New Fortress Energy looks to expand in Mexico and Brazil

US-based midstream player New Fortress Energy is looking for opportunities in Mexico and Brazil after opening an LNG terminal in Mexico’s Baja California Sur state.

The firm is interested in supplying natural gas to power plants owned by public utility CFE, building its own power plants to sell energy in the wholesale market, or converting existing generators to natural gas.

New Fortress’ Pichilingue terminal in La Paz, Baja California Sur, was inaugurated on July 14, the company said in a statement. An associated 135MW power plant is expected to come online in the third quarter.

“What’s allowed us to get to where we are [with this terminal] is a great partnership with the government of Mexico and state-owned company CFE,” managing director Andrew Dete said during the annual investors’ update on Monday. 

“The government has made the peninsulas [of Baja California and Yucatán] a key priority for development, and that’s been a great partnership for us.”

The company highlighted the strategic value of having a natural gas terminal in what it called an “energy island” which functions mainly through oil-based fuels.

“The value proposition is really strong,” Dete said. “Being able to talk to our stakeholders in the peninsula, energy consumers who want more reliable and cheaper electricity and fuel – our terminal is going to provide that. [About] 95% of the power generated in the peninsula [of Baja California] is thermal.”

New Fortress also said the terminal opened business opportunities, including the possibility of converting some of these thermal units to natural gas and supplying them, a possibility it is discussing with CFE.

“There’s a great amount of capacity in Baja that we expect to have exciting announcements on soon, being able to convert to [run on] LNG,” Dete said.

In Brazil, the company bought natural gas firm Hygo Energy Transition for US$2.18bn early this year. New Fortress said it was excited about growth opportunities in the country’s rapidly changing natural gas landscape.

Since the acquisition, “we’ve had a great dialogue with our clients,” Dete said. “There’s a very undersupplied market in energy, both in terms of fuel and power. They face high prices in the existing gas network and outside of it.”

He added, “we have a market that reflects a lot of the characteristics of a legacy monopoly, with underinvestment in infrastructure that is causing these higher prices.”

The company also said the decline of hydroelectric generation due to lower rain levels, coupled with a decline in Bolivian gas production, has left some of Brazil’s regions in “urgent” need of new and reliable natural gas sources, which the firm claims it can provide.

Clean fuels push

New Fortress also unveiled plans to create a clean fuels company initially focused on the production and distribution of blue ammonia. 

Blue ammonia is produced not through renewable energy (like green ammonia) but through an emissions-heavy process known as steam-methane reforming, by adding nitrogen to the resulting hydrogen molecule.

Carbon emissions can be reduced through carbon-capture techniques, turning the end-product into blue ammonia. After transport, blue ammonia can be converted back into hydrogen, but it is easier to transport due to it being a larger molecule, New Fortress said.

To achieve this, the firm plans to first build an ammonia production facility or buy one, implement carbon-capture technology, and capitalize a separate company focused on clean fuels.

The firm added that the ammonia business would become beneficial in countries that are adopting carbon emissions taxes.