Shell and Mexico Pacific sign 20-year LNG sale and purchase agreement

Energy major Shell Eastern Trading (Shell) and a subsidiary of Mexico Pacific have signed a 20-year sales and purchase agreement for Shell to offtake approximately 1.1 million tonnes per year (MTPA) of liquefied natural gas (LNG) from the third train of Mexico Pacific’s anchor LNG export facility, Saguaro Energia, located in Puerto Libertad, Sonora, Mexico.

Saguaro Energia LNG facility consists of three trains in the first phase with a capacity of 14.1 MTPA, and according to the Mexico Pacific, it has significant cost and logistical advantages, including the lowest landed price of North American LNG into Asia, leveraging low-cost natural gas sourced from the nearby Permian Basin, and a significantly shorter shipping route that avoids Panama Canal transit for Asian markets.

Ivan Van der Walt, CEO of Mexico Pacific, said: “We are delighted Shell has chosen to grow with us, building upon their initial 2.6 MTPA commitment from train 1 and train 2, to also underpin more than 20% of train 3 capacity. Our project will provide Asia with low-cost Permian gas, avoiding the Panama Canal to ensure a shorter shipping distance to Asia, to achieve lower transportation emissions and landed pricing vs. the US Gulf Coast.

“As we work to deliver a final investment decision (FID) on the first two trains, we are also closing out contracting across the significant commercial momentum in place for train 3 to ensure that a subsequent train 3 FID can follow as quickly as possible.”

Chuck Davidson, Mexico Pacific Chairman and Partner at Quantum Energy Partners, added: “Mexico Pacific is uniquely facilitating the connection of low-cost Permian Basin gas with the lower carbon fuel needs of Asia to deliver de-risked and affordable new LNG supply, resulting in additional energy security for the region. We are pleased to have the ongoing support of Shell, one of the largest market participants, to underpin investment in critically needed new supply.”

Steve Hill, Executive Vice President of Energy Marketing at Shell, stated: “LNG is an increasingly important pillar of global energy security. Investment in liquefaction projects is needed to avoid a supply-demand gap that is expected to emerge in the late 2020s. We are pleased to be working with Mexico Pacific to provide more LNG to the global market.”

Shell led the global long-term liquefied natural gas (LNG) import contract volumes signed by key purchasing companies in 2022, with a contracted capacity of 6.7 MTPA, data and analytics company GlobalData found in its report.

The biggest long-term contract signed was with Mexico Pacific in 2022 when the two parties signed an agreement for Shell to offtake 2.6 MTPA of LNG from the first two trains.