New Fortress Energy Inc. (NFE) and Mexico’s state-owned oil and gas producer Petróleos Mexicanos (Pemex) signed a deal related to the launch of a floating LNG (FLNG) unit off the coast of Veracruz in southeastern Mexico.

The 1.4 million tonnes per annum (mtpa) Sevan Driller FLNG unit will commercialize the majority of the production to come from the deepwater Lakach Field, NFE announced Nov. 22 in a press release.

“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,” NFE Chairman and CEO Wes Edens said in the release.

NFE also agreed to invest in the Lakach Field—one of the largest non-associated gas fields in the Gulf of Mexico—over a two-year period where it will complete seven wells The all-in cost of producing LNG at Lakach will be among the lowest in the world, according to NFE.

The Sevan Driller FLNG is one of five FLNG units NFE foresees deploying over the next two years. The company projects adding 7 mtpa of incremental liquefaction capacity to the global market, more than half of the world’s total expected capacity additions during the 2023-2024 period, NFE said.

NEF Agreements with Pemex

NFE has agreed to provide upstream services to Pemex as part of the Lakach Field development plan and FLNG deployment. 

Per the agreement, NFE will produce natural gas and condensate in exchange for a fee for every unit of production delivered to Pemex. The fee is based on a contractual formula that resembles industry-standard gross profit-sharing agreements between NFE, the upstream service provider, and Pemex, the owner of the hydrocarbons, NFE said.

NFE will have the right to purchase the natural gas it produces in the Lakach Field, per the agreement. 

As agreed, NFE will have the right to purchase, at a contracted rate, sufficient volumes for its FLNG unit, while Pemex will sell the remaining natural gas volumes and all of the produced condensate to its customers onshore.

Heavily indebted Pemex continues to operate under a mandate that favors the nationalistic aims of the government of President Andrés Manuel López Obrador. The Mexico City-based company continues to struggle to boost both oil and gas production and continues to rely heavily on piped-gas imports from the U.S. to fulfill the country’s rising domestic demand for gas.

Lakach Field Reserve Life

The Lakach Field was discovered by Pemex in 2007. The state oil giant subsequently carried out significant exploration and development activities at the field but in 2014 amid oil prices declines the company ceased allocating capital to the field and suspended further development.

NFE and Pemex estimate the Lakach Field can produce for approximately ten years. Potential exists to extend the reserve life of the field if the nearby Kunah and Piklis fields are developed.

The area around the Lakach Field, coupled with the Kunah and Piklis fields, has a total resource potential of 3.3 Tcf and comprises one of the most significant undeveloped offshore natural gas resources in the Western hemisphere, according to NFE.

Offshore