Stabilis considers Monterrey for site of LNG plant
Idea comes as firm pushes reach south
Houston liquefied natural gas company Stabilis Energy is eyeing the industrial and wealthy city of Monterrey for the location of its first LNG plant in Mexico.
Stabilis entered into a pair of deals Wednesday that not only extend the company’s reach south, but also lay the groundwork to build a plant that can receive natural gas from the Eagle Ford Shale of South Texas, supercool the gas until it becomes a liquid and then haul the fuel on tanker trucks to customers in remote sites.
“We see this as a huge opportunity for LNG based on the market fundamentals down there,” Stabilis Energy CEO Jim Reddinger said. “We’re excited to have an incountry presence for both operations and investment.”
In the first deal, Stabilis bought Diversenergy, an LNG marketing company based in Spring that has several customers in Mexico. Under the second deal, Stabilis formed a joint venture with CryoMex, a subsidiary of the Monterrey industrial conglomerate Grupo CLISA.
Financial terms of those deals were not disclosed, but Reddinger said the two deals are part of the company’s strategic push into Mexico. Using its 120,000-gallon per day liquefaction plant in the Eagle Ford town of George West, Stabilis has sold LNG as a fuel for drilling companies, sand mines and other customers in South Texas over the past four and a half years.
Third-party distributors have bought g a growing amount of LNG from the Stabilis plant and used tanker trucks to haul the LNG across the border where it is used by mining companies, factories and industrial-scale greenhouses that do not have natural
gas pipeline access.
Stabilis estimates that over the next five years, such customers will consume up to 3 million gallons of LNG per day, which roughly translates into about 1 billion gallons per year. After buying Diversenergy and forming the joint venture with Grupo CLISA, the company is seeking to supply 900,000 gallons per day of that demand, which may require multiple liquefaction facilities.
“The fundamental fact is that Mexico is a lot less pipeline rich than the United States, especially when it comes to last-mile distribution pipeline,” Reddinger said. “There are a number of manufacturing facilities and mines that don’t have natural gas access. There’s a much larger opportunity set down there on a relative basis to the United States.”
Under some unique cross-border market conditions, the LNG sold by tanker truck in Mexico fetches a higher price than it would get in the United States but remains cheaper than diesel in Mexico.
Natural gas sells for $2.15 per million British thermal units on the Henry Hub in Louisiana while LNG is sold for $3 to $5 higher in Mexico. With diesel at about $4 per gallon in most of Mexico, LNG is viewed as a competitive fuel.
Stabilis plans to obtain its natural gas from the Nueva Era Pipeline, a project developed in a joint venture between Grupo CLISA and San Antonio pipeline operator Howard Energy Partners. The pipeline was built to move natural gas from the Eagle Ford Shale of South Texas to power plants in the Monterrey area, but it has excess capacity that can be used by Stabilis and other customers.
In addition to LNG plants, Stabilis and Grupo CLISA plan to build compressed natural gas facilities that will be used as fuel by 18-wheelers and other fleet vehicles.