Oil & Gas

18 Nov 2020

Mexico's Costa Azul Takes First LNG Project FID of 2020

18 Nov 2020  by Antonio Peciccia   

US firm Sempra Energy has taken a final investment decision (FID) on its Energia Costa Azul (ECA) LNG export terminal in Mexico, making it the first liquefaction project to be approved in 2020.

The project consists of a single train with nameplate export capacity of 3.25mn t/yr, and is expected to start production in late 2024, Sempra said. This would be larger than the 2.5mn t/yr facility that the firm had initially considered, but the terminal is still expected to have "initial offtake capacity" of 2.5mn t/yr, the firm said, suggesting that exports may initially remain below nameplate capacity.

ECA LNG's aggregate offtake agreements total 2.5mn t/yr, made up of a 1.7mn t/yr contract with Total and a 800,000 t/yr deal with Japanese trading firm Mitsui.

The project developer had initially considered a 2.5mn t/yr export facility for the first phase, as existing US pipeline infrastructure would be sufficient to supply a facility of this size. The terminal will receive feedgas from the US, mainly expected from the Permian basin in west Texas and the San Juan basin in New Mexico.

The FID only refers to ECA LNG's first phase, which will cost approximately $2bn and be funded through a combination of equity contributions and debt, Sempra said. The liquefaction train will be added to the existing LNG import terminal in Baja California, which has pipeline connections to the US and two 160,000m³ LNG storage tanks. San Diego-based Sempra built the facility in 2008 to supply southwest US markets, including southern California, before the shale revolution allowed the US to rely on domestic production and become an LNG exporter. The terminal has been largely idle since 2016.

A second phase at Costa Azul would add two trains with combined liquefaction capacity of 12.4mn t/yr, but this would require the construction of a new pipeline to bring in gas from the Permian basin.

Pacific pioneer

ECA LNG is set to become the first LNG export project on North America's Pacific coast, allowing for shorter delivery times to Asia and lower costs compared with US Gulf coast exports, as it avoids Panama Canal fees.

An FID for the project had been repeatedly postponed, having initially been expected by the end of last year.

ECA LNG is the only LNG export project to have taken an FID this year. A total of 50mn t/yr of liquefaction capacity had been expected to be approved this year, but the economic downturn stemming from Covid-19 has led many project developers to slash capital expenditure and postpone investment decisions, which may result in the global LNG market tightening by the middle of this decade.

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