Mexican LNG developer signs 2.6-Mt/y deal with Shell

Shell PLC agreed to buy 2.6 million tonnes of liquified natural gas per year from Mexico Pacific Ltd. LLC's proposed export terminal on the West Coast of Mexico, supporting the developer's goal of advancing the project to construction in the coming months.

Under the 20-year sale and purchase agreement announced July 12, the LNG portfolio giant's Shell Eastern Trading (Pte.) Ltd. unit will off-take LNG supplies from the first two trains of the export project on a free-on-board basis. Each of the first two phases of the project would include a 4.7-Mt/y natural gas liquefaction train. The company has targeted September for a final investment decision on the first two trains, covering a combined 9.4 Mt/y of capacity.

Privately held Mexico Pacific, or MPL, would use U.S. feedgas to produce LNG and is catering mostly to Asian utilities and other end users. The developer has spent more than a year building the commercial support it needs to greenlight the project, which is in Puerto Libertad, Sonora, about 125 miles south of the Arizona border on the north edge of the Sea of Cortez. MPL has said it has permits for a third 4.7-Mt/y train.

A key selling point of the MPL project is its proposed location on the Pacific Ocean. This would allow tankers to avoid the Panama Canal and reach East Asia in about half the time of shipments from the U.S. Gulf Coast. The project would connect with an existing pipeline system that is underutilized.

MPL CEO Douglas Shanda said in a statement that Shell was a "foundation customer" for the project that could start production as soon as 2026.

"Their recognition of the advantages our location offers, including access to low-cost Permian gas, avoidance of the Panama Canal to ensure a shorter shipping distance to Asia, and lower landed pricing, demonstrates the value of West Coast North American LNG," Shanda said in a statement.

The deal between Shell and MPL follows a wave of recent long-term deals tied to U.S. LNG projects. Financial terms were not disclosed.

MPL executives said in March that the company had secured binding off-take agreements for about a third of the volumes it needs to cover the first two trains and that it was close to signing commitments for the remaining volumes. The deals included an agreement by China's Guangzhou Development Group Inc. to buy 2 Mt/y of LNG, subject to conditions that included MPL reaching a final investment decision on the project.

An MPL spokesperson did not immediately respond to a request for comment July 12.

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