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ConocoPhillips Agrees To Long-Term LNG Deal With Mexico

ConocoPhillips has agreed to a long-term LNG deal from a $15 billion export terminal that is being built in Puerto Libertad, Sonora, Mexico, according to a press release.

The free on-board basis deal with span 20 years, with Conoco committing to purchasing 2.2 million tons per year of LNG from Mexico Pacific Limited LLC.

Mexico Pacific Limited LLC is building out the terminal and in Sonora, Mexico, which is expected to cost some $15 billion. It is also planning to build a 500-mile-long pipeline as part of the project. The annual capacity of the first three LNG trains part of the project is expected to be 15 MTPA. It is expected to open by 2027.

Conoco will also supply the terminal with gas from the Permian Basin, providing it with an outlet for its gas.

Conoco has said that the strategic location on the West Coast of Mexico will result in lower gas emissions because of the shorter transit to Asian Markets compared to other GoM and Pacific Basin producers.

Conoco has other LNG projects lined up, including future expansions at Port Arthur and Sempra Energia Costa Azul LNG export project, the latter, which is also on Mexico’s West Coast.

“Mexico Pacific’s exceptional North American West Coast project fundamentals leverage abundant, low-cost natural gas from the nearby Permian Basin and a significantly closer proximity to Asia, the engine room of global LNG demand, to reliably deliver the lowest landed priced LNG into Asia. We will position Mexico as the fourth largest LNG exporting country and a key contributor in meeting critical energy security needs,” Mexico Pacific says on its website.

“While our sales volumes exceed our Train 1 and 2 FID requirements, we are excited to move into oversubscribed territory with one of the strongest Permian Basin and LNG market participants in the market – a validation of our project’s fundamentals and position. We look forward to continuing the collaborative relationship we have with ConocoPhillips as we focus on delivering a final investment decision (FID) on our first two trains with Train 3 to follow shortly thereafter,” the press release from Mexico Pacific reads.

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ConocoPhillips will also have the option to contract further expansion train volumes.

By Julianne Geiger for Oilprice.com

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