Two oil & gas firms seal the deal for deepwater project in Gulf of Mexico

Two firms seal the deal for ‘one of the largest non-associated gas fields in the Gulf of Mexico’

U.S. energy infrastructure company New Fortress Energy (NFE) has finalised the agreements with Mexico’s state-owned petroleum company Pemex in regard to the development of a deepwater gas field in the Gulf of Mexico, where an FLNG solution is planned to be deployed.

Illustration; Archive; New Fortress Energy (NFE)

Back in July 2022, NFE inked a deal with Pemex to jointly develop the Lakach natural gas field and deploy an FLNG solution. To this end, New Fortress Energy entered into master services agreements with Singapore’s Sembcorp Marine in October 2022 for the conversion of two Sevan cylindrical drilling vessels into floating LNG (FLNG) facilities.

As a result, Sembcorp Marine will handle the engineering and conversion of these two drilling vessels to FLNG facilities, including the fabrication and integration of LNG topside modules. These FLNG units will host the NFE-designed fast LNG liquefaction production facility with a capacity of approximately 1.4 million tonnes per annum (mtpa). The hull conversion and fabrication of topsides for the first FLNG facility is scheduled for delivery in April 2024. This unit is expected to be deployed at the Lakach field.

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In an update on Tuesday, NFE revealed that agreements with Pemex were finalised, allowing it to develop and operate this integrated upstream and natural gas liquefaction project off the coast of Veracruz in Southeastern Mexico.

Wes Edens, Chairman and CEO of NFE, commented: “We are pleased to finalise 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.”

Moreover, the company highlights that these agreements comprise a long-term strategic partnership, supported by Andrés Manuel López Obrador, the President of Mexico, to complete the development of the Lakach deepwater natural gas field, which is described as “one of the largest non-associated gas fields in the Gulf of Mexico.”

“Over the last several months, we have enjoyed the opportunity to expand our relationship with Mexico’s leading energy companies. We appreciate President López Obrador’s continued interest in and support of our development process and look forward to delivering reliable solutions that enhance energy security for the people of Mexico and our customers around the world,” underlined Edens.

Under the terms of this deal, NFE will provide upstream services to Pemex by producing natural gas and condensate in exchange for a fee for every unit delivered to Pemex. This fee is based on a contractual formula that resembles industry-standard gross profit-sharing agreements between the upstream service provider and the owner of the hydrocarbons, according to NFE.

Moreover, the U.S. company will have the right to purchase, at a contracted rate, sufficient volumes for its FLNG unit from the natural gas it will produce in the Lakach field, while Pemex will sell the remaining natural gas volumes and all of the produced condensate to its customers onshore.

Seven-well campaign and deployment of FLNG unit

In line with this deal, NFE will invest in the continued development of the Lakach field over a two-year period by completing seven offshore wells. The firm will also deploy its 1.4 MTPA Sevan Driller FLNG unit – currently undergoing conversion at a shipyard in Singapore – to the field in a bid to liquefy the majority of the produced natural gas.

“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,” added Edens.

Furthermore, the U.S. player anticipates the all-in cost of producing LNG at the Lakach field will be “among the lowest in the world.” The Lakach FLNG unit is one of five FLNG units that the firm plans to deploy in the next two years, adding approximately 7.0 MTPA of incremental liquefaction capacity to the global market, which is “more than half of the world’s total expected capacity additions during the 2023-2024 period.”

The Lakach deepwater natural gas field was discovered in 2007 by Pemex. The Mexican giant subsequently carried out exploration and development activities but ceased allocating capital to the field and suspended further development amid oil price declines in 2014. This changed under the leadership of President López Obrador, as the Mexican government claims that completing Lakach is “a matter of national interest.”

Octavio Romero Oropeza, CEO of Pemex, remarked: “Pemex is pleased to finalise this strategic partnership with NFE, a leading energy infrastructure company. We believe this partnership 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.”

Both players believe that the Lakach field will yield approximately ten years of production and has the potential to “significantly extend” the reserve life if the nearby Kunah and Piklis fields are developed. With these nearby fields, the area around Lakach has a total resource potential of 3.3 trillion cubic feet (Tcf) and comprises “one of the most significant undeveloped offshore natural gas resources in the Western hemisphere.”

When it comes to NFE’s other recent activities, it is worth noting that the U.S. player finalised its agreements with Mexico’s Comisión Federal de Electricidad (CFE) in October 2022 as part of a growing strategic alliance.

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This covers the expansion of the company’s gas supply to CFE’s power plants, selling New Fortress’ La Paz power plant to CFE and creating the new floating LNG hub off the coast of Altamira.