Spotlight: New Fortress Energy's partnerships with Mexico's CFE

US-based New Fortress Energy (NFE) has provided new details on its US$2.2bn partnership with Mexico’s public power utility CFE to build an offshore LNG hub and extend its natural gas supply to the latter’s power plants.

The agreement has three sections, according to a statement, with the first comprising the extension and volume expansion of its supply contracts that feed CFE's thermal power plants in Baja California Sur, from its recently completed Pichilingue regasification terminal.

The second section involves a collaboration between both companies to build an LNG hub off the coast of Tamaulipas state, comprised initially of two floating LNG units with processing capacity of 1.4Mt/y each. CFE will be able to produce and sell an unspecified amount of the project's LNG output.

The project will feed off CFE's existing pipeline capacity, NFE said.

"We'll provide the capital and they'll provide the gas, which they'll purchase on our behalf, and provide the transportation," CEO Wes Edens told investors on Tuesday. "We'll take that gas, already treated, coming from Texas and so in perfect shape to then be processed, turned into LNG available for export or to different parts of Mexico."

Lastly, NFE agreed to sell its 135MW La Paz gas turbine plant, located in the port city of the same name, to CFE, expanding the company's portfolio in Baja California Sur.

According to Edens, the sale was decided to accommodate CFE's commitment to growing its generation park. CFE and the government have recently clamped down on private plants working under schemes that bypass the company's transmission lines.

"Over the course of the last several months, we've had a number of conversations with them. They have an agenda, a very open agenda, where they are focused on owning and managing their own power assets inside the country. This is a unique situation in that we've got a brand new plant ready to go, a gas power plant located on the ground, and their desire is to buy that asset from us and enter into a long-term gas agreement, that's what we've shook hands on," Edens said.

The agreement, he added, has not been finalized, as the exact price of the unit and the gas supply to be provided by New Fortress are still being negotiated.

"I'm quite optimistic, given the conversations we've had with the president and the head of CFE [Manuel Bartlett], that we feel very good about the likelihood of reaching commercial terms with them in the very short term. But we signed an agreement on Friday to signify we are well advanced on this and expect completion and now have to work out the details," Edens said.

The plans are part of a new strategic alliance with Mexico's state-owned energy companies, which also includes the development of federal oil and gas company Pemex's abandoned Lakach deepwater field.

Edens also said that, after surveying more than 15 gas producing regions, the company reached the conclusion that the US was the world's most reliable supplier to deliver new LNG projects, and hence it would continue to seek opportunities in North America.

And "[CFE] have been terrific partners with us," he added.