ConocoPhillips Agrees to Buy LNG From Mexico Project

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(Bloomberg) — ConocoPhillips agreed to a long-term deal to buy liquefied natural gas from an export terminal being developed on Mexico’s west coast.  

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Under a 20-year agreement, ConocoPhillips will buy approximately 2.2 million tons of LNG annually from Mexico Pacific Limited LLC, the companies said in a statement Thursday. The facility in Sonora will cost an estimated $15 billion to build and have an annual capacity of 15 million tons for the first three units, or trains, according to Sarah Bairstow, Mexico Pacific’s president and chief commercial officer. It’s scheduled to open by 2027.

Lining up long-term agreements with large well-capitalized companies is crucial for LNG terminal developers to secure financing. Houston-based Mexico Pacific already has deals in place with Exxon Mobil Corp., Shell Plc and China’s Zhejiang Energy and Guangzhou Development Gas Trading. It plans to make a final decision later this year whether to move forward with building the first two liquefaction units, or trains, for the project, Saguaro LNG.

In addition to buying cargoes from Mexico Pacific, ConocoPhillips will supply the terminal with gas from the Permian Basin of Texas and New Mexico, allowing the energy giant to tap growing demand around the globe for the fuel.   

The proposed project will complement the Port Arthur LNG project in Texas that ConocoPhillips owns a stake in, company executives said on a call with analysts Thursday. The agreement is “all in service with trying to build up a bigger LNG business inside the company,” Chief Executive Officer Ryan Lance said. 

Mexico Pacific plans to build a pipeline approximately 500 miles long in Mexico as part of the project, crossing the state of Chihuahua, to deliver gas from the US, Bairstow said. 

(Updates from ConocoPhillips executives in the fifth paragraph.)