Mexico will give Sempra LNG export permit, on one condition

Mexico will give the local unit of U.S.-based Sempra Energy an export permit for a LNG facility in northwest Mexico, as long as the company helps offset an oversupply of gas in the area, the president said.

San Diego-based Sempra has previously signaled that its Mexican unit IEnova is close to obtaining the export permit for the LNG plant at its existing terminal near the northwestern city of Ensenada.

President Andres Manuel Lopez Obrador told reporters at a news conference that he is inclined to approve the permit but stressed what he described as excess natural gas in the area around the northern Pacific coast, given that state-owned power company Comision Federal de Electricidad (CFE) does not use the fuel to generate electricity.

The CFE’s plants in the area burn highly-contaminating fuel oil instead.

Lopez Obrador said supply contracts inked by the previous government obliged CFE to buy natural gas that is not needed.

“If we stop buying all that gas that is not used and that we have to pay for, and if (Sempra) helps us export that gas via that plant in Ensenada, then we’d give the permit,” said Lopez Obrador.

The comments appeared to walk back the government’s interest in requiring IEnova to build a second LNG export facility before approving the pending plant in Ensenada, which was reported by Reuters in August.

Lopez Obrador said a second plant would cost $2 billion and take four years to build.

The LNG export permit would be the first of its kind for a private company in Mexico, with an initial export capacity of some 3 MMtpy of LNG.

It would also likely represent a lucrative means of selling LNG to markets in Asia, where natural gas prices are considerably higher then in the Americas.

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