[By Emilio Godoy and Patrick Moore]
Last September, just off the Gulf coast of the Mexican city of Altamira, the country’s first shipment of liquefied natural gas (LNG) left a floating facility run by US company New Fortress Energy, bound for Europe.
The new venture is part of a wave of gas investment that has arrived in the country in recent years, targeting markets in Europe and Southeast Asia with US-produced, Mexico-processed natural gas, liquefied by cooling to -162C in a process that compresses its volume to allow for easier shipping.
Since the beginning of the decade, significant increases in global LNG infrastructure have been announced, with USD 1.1 trillion worth of new terminals under development as of last year. This has been driven by forecasts of growing gas demand in Asia, soaring output from the US, and Europe’s efforts to cut down on its dependency on Russian gas imports following the invasion of Ukraine in 2022 – a landscape that has led US producers to set their eyes on new ports on the Mexican coast that could shorten shipping routes to overseas markets.
But ambitions of a potential boom in Mexico may be running up against mixed weather in the global gas market, as well as political developments on both sides of the border. This includes the prospect of tensions between returned US president Donald Trump and his Mexican counterpart Claudia Sheinbaum over trade and tariffs, migration and a host of other issues.
Environmental campaigners, meanwhile, have continued to voice concerns over the potential consequences of a build-up in LNG infrastructure that could position Mexico as the world’s fourth-largest exporter of the fuel.
“The industry talks about gas being a transitional fuel and replacing coal in Asia, but that is not the case. It is more polluting than coal, because of all the steps involved in exporting it,” said Nichole Heil, research and campaigns coordinator for the Private Equity Stakeholder Project (PESP), a non-profit focusing on the impacts of private funds.
“Part of the problem is also the export of emissions,” she added. “The United States exports them to Mexico, Mexico sends them to Asia, and they are not included in the emissions accounting.”
A cross-border bet on LNG
The US and Mexico have a long-standing relationship in the gas sector. Mexico imports more than half of its gas supply, almost all of it via pipelines from its northern neighbour, with a growing network transporting gas from hubs in Texas, Arizona and New Mexico.
The prospect of exporting and processing LNG via this network has seen at least half a dozen projects pitched in Mexico. In addition to the Altamira terminal that made its first shipment in 2024, works to build an export terminal at the Costa Azul hub on the country’s west coast are underway, with operations expected to begin in 2026. Elsewhere on the west coast, the Vista Pacífico, Saguaro and Amigo terminals have been proposed.
As US investors eye projects, Mexico’s national power company, CFE, has also sought to get in on the action. It proposed the Salina Cruz export terminal in the southern state of Oaxaca and the Coatzacoalcos facility on the Gulf coast of the state of Veracruz.
These proposals have seen Mexican and US developers such as CFE, Mexico Pacific and Sempra Infrastructure strike deals with financers and potential LNG buyers including banks and multinational energy firms from Australia, China, France, Japan, Malaysia, Singapore and South Korea.
However, proposed LNG projects in Mexico have also been contingent on acquiring permits for the re-export of US gas issued by the Department of Energy, which allow for shipments to countries with which the US does not have free trade agreements – a roster that includes the European Union and nearly all Asian nations.
The issuing of LNG export permits had been paused since January 2024 as former US president Joe Biden’s administration called for a review into their climate impacts.
The measure generated uncertainty over projects, court battles, and anger in the industry, but was revoked on 20 January, day one of Donald Trump’s return to the White House – true to pledges he made during his election campaign.
The lifting of the Biden-era order has been welcomed by the sector, but analysts remain uncertain about the wider impacts Trump’s return will have on ambitions for Mexican LNG exports, even with his firm backing for fossil fuels – notoriously promising to “drill, baby, drill”. Commentators have highlighted political risks from potential US policies, both domestic and those targeted at Mexico, that could raise tensions between the two countries.
LNG shipments may yet get caught up in the trade war unleashed by President Trump, which has so far included imposing an additional 10% tariff on Chinese goods starting 4 February. Mexico, meanwhile, negotiated an extra month to avoid an announced 25% US tariff on the country’s goods, after President Sheinbaum agreed on 1 February to US demands to increase security at its northern border.
For Heil, the PESP researcher, Trump’s push for more LNG has serious consequences. “Outside of questionable economic gains for Americans, the uncertain demand for LNG, suppressed private equity returns, and financial liabilities associated with LNG impacts on local communities and the environment create a shaky foundation for the LNG industry and its potential future,” she says.
Environmental concerns
The role of natural gas and its liquefied form in global energy systems is a source of fierce debate, including its contested labeling as a “bridge” or “transition fuel” in the switch to renewables-based systems.
On the expansion of Mexican LNG infrastructure, environmentalists have expressed fears over the potential impacts along these new supply chains. These include methane leaks during liquefaction, transportation and regasification processes, among other problems, that would contribute negatively to emissions.
The proposed Saguaro project, in particular, has attracted strong opposition from a coalition of more than 30 community and environmental organizations, as well as the US-based NGO, the Natural Resources Defense Council (NRDC), which has described it as the “wrong project, wrong place.”
Mima Holt, the NRDC’s global coordinator for international climate, said that processes to evaluate new projects must consider potential economic and environmental impacts. “That includes climate impacts and the unique characteristics and needs of special places like the Gulf of California,” she noted. “The ‘Aquarium of the World’ is not a sacrifice zone for the whims of the American oil industry.”
Pablo Ramírez, director of the climate change campaign at Greenpeace Mexico, questioned the development of LNG projects in the country.
“They do not take into account environmental and social liabilities, and those costs are not reflected in the terminals,” he told Dialogue Earth. “What we have seen is that the plan for these projects between private companies and the Mexican government is a new form of maquila,” he added, referring to Mexican factories that assemble and manufacture for export. “We manufacture gas that is not ours, generating wealth that does not stay here and assuming liabilities. CFE is looking for a rate that will pay off exports and the gas pipelines it manages.”
Meanwhile, the relocation of US gas export operations has been pitched by supporters as a method of cutting certain emissions in its supply chains, namely those from shipping.
In its 2022 environmental assessment of the Vista Pacífico project, the US Department of Energy estimated that life-cycle emissions of LNG shipped from New Orleans to Shanghai – a route that requires going through the Panama or Suez canals, or long voyages around southern continental capes – would total 688 kilograms of CO2 equivalent per megawatt-hour of power generated using the fuel. Of this, 76 kilograms – or 11 percent – would come from tanker transport.
In comparison, transporting LNG directly across the Pacific, between Shanghai and Topolobampo in western Mexico, where the Vista Pacífico facility is being proposed, would reduce overall emissions by between 3% and 7% due to the shortened route, the assessment noted.
Boom or bubble?
Beyond the potential environmental impacts of a global LNG infrastructure build-out, some analysts have also cast doubt on the long-term economics of export projects, amid a mixed outlook for demand.
Rather than a boom, organizations such as the Institute for Energy Economics and Financial Analysis (IEEFA) have warned of a bubble as LNG potentially reaches oversupply by 2026.
A few years on from Europe’s rush to find new suppliers after Russia’s invasion of Ukraine, the continent’s LNG demand is now in decline as its countries pursue ambitious clean energy targets by the end of the decade.
Meanwhile, in Asia – the region forecast to account for the majority of future LNG demand growth – varying challenges around project delivery and fiscal issues may dampen demand, the IEEFA says. It also suggests that Chinese policies favouring domestic industries will likely constrain the country’s import demand.
PESP’s Nichole Heil raised the prospect of such investments becoming faltering assets. “As the global momentum shifts towards reducing carbon emissions and adopting renewable energy, investments in gas pipelines and LNG facilities with long payback periods may not deliver the expected returns. This poses risks for institutional investors, especially pension funds, which rely on consistent returns,” she told Dialogue Earth.
Rachel Eunbi Shin, an energy supply chain researcher at the South Korean NGO For Our Climate, said that the industry has encouraged oversupply to stimulate artificial demand. “Demand is falling; most players are buying LNG and planning to resell it, creating an artificial market. But the infrastructure is increasing,” she told Dialogue Earth from Seoul.
As for Mexico’s projects, President Sheinbaum has not expressed a government stance on the wave of LNG projects, but praised Mexico Pacific’s investment last October when she met the corporation’s CEO Sarah Bairstow.
This article appears courtesy of Dialogue Earth and may be found in its original form here.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.
