Costa Azul

Closing midstream deals has been a bit of a challenge in 2020, to say the least. In fact, this has been a year when many projects have been sidelined or cancelled outright, with most decisions on even the best prospects getting pushed to next year. But it hasn’t been all bad news. In a few cases, assets with advantages have made it across the finish line, even in the land of liquefied natural gas (LNG) export projects. Despite this summer’s collapse in U.S. LNG exports, driven by a compression of the spreads in global gas prices, Sempra Energy recently announced that it is going ahead with Phase 1 at its Costa Azul liquefaction project in Mexico’s Baja California. How did they pull this off in such a tumultuous year? Well, Costa Azul isn’t your everyday LNG export project. Today, we detail the most recent U.S. LNG export project to receive a final investment decision (FID) to proceed.

At a time when market prices have been weakened by a surplus of new natural gas production waiting for demand to develop, Mexico has been stepping up to the plate by increasing imports.  Gas demand for Mexican power generation, industrial use, and commercial and residential space heating continues to increase at a torrid pace south of the Rio Grande, much to the relief of gas producers in the Eagle Ford, the Permian Basin and other U.S. plays within reach of the international border. Today we provide an update on Mexico’s growing dependence on U.S.-sourced gas, and the implications for producers and midstream companies.