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LatAmOil: Shell signs 20-year LNG supply deal with MPL

Shell (UK) announced on July 12 that its subsidiary Shell Eastern Trading Ltd had arranged to purchase 2.6mn tonnes per year (tpy) of LNG from a new gas liquefaction plant slated for construction at Puerto Libertad in Mexico’s Sonora State.

In a statement, Shell said that its subsidiary had signed a sales and purchase agreement (SPA) with an affiliate of the future plant’s owner and operator Mexico Pacific Ltd (MPL), which is controlled by the US investment firm AVAIO Capital. That agreement provides for Shell Eastern Trading to buy 2.6mn tpy of LNG from the first two production trains of the Puerto Libertad plant over a period of 20 years.

MPL will deliver the LNG on a free on board (FOB) basis, the statement noted.

The LNG plant is due to begin operating in 2026 and will process gas pumped from Permian basin fields in the US states of Texas and New Mexico across the border into Mexico by pipeline. It will eventually have three production trains and a total production capacity of 14.1mn tpy, Shell said.

Douglas Shanda, the president and CEO of MPL, said the signing of the SPA would benefit all parties. “We are delighted to welcome Shell as a foundation customer at our anchor LNG facility,” he said. “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. We are equally delighted that Shell has chosen to work with us as we continue to pursue LNG production growth to meet increasing energy security needs.”

Meanwhile, Steve Hill, Shell’s executive vice president for energy marketing, said the deal with MPL would help the super-major meet global demand for LNG. “Energy security remains paramount for the world,” he commented. “The demand for LNG is set to continue to rise, with further LNG required to ensure security of supply and progress the energy transition. We look forward to continuing to work with Mexico Pacific as they advance to bring more LNG [production capacity] online.”

According to previous reports, MPL has already signed binding off-take agreements for 8mn tpy of LNG with several clients. One of these is Guangzhou Development Natural Gas Trading, a subsidiary of China’s Guangzhou Development Group (GDG). The Chinese company agreed in April of this year to buy 2mn tpy over a period of 20 years.

  • MPL also hopes to make a final investment decision (FID) on the first two production trains of its LNG plant in the third quarter of 2022 and may begin construction soon afterward.