Saguaro LNG project in Mexico faces “major red flags”

The internal turmoil at the largest LNG project proposed for Mexico’s Pacific Coast should raise “major red flags” for investors, according to a new report.

Saguaro LNG, a massive 15-million-tonne-per year gas export facility proposed for the state of Sonora in the Gulf of California, is widely seen as the linchpin for Mexico’s bid to become a global LNG exporter. The project would source gas from Texas, shipped over a long-distance pipeline, and export LNG to Asia.

But the project has lost momentum, weighed down by a litany of internal problems and battered by growing external headwinds, a report from the Institute for Energy Economics and Financial Analysis (IEEFA) warns.

Mexico Pacific, the company behind Saguaro LNG, originally filed for its permit with the U.S. Department of Energy back in 2018 but has been repeatedly delayed and has seen costs continue to balloon.

The company has been owned by a succession of energy investment firms, most recently a private equity firm called Quantum Capital.

Earlier this year, Quantum Capital offloaded its holdings in Mexico Pacific to a new entity called Kronos Polo, which can be traced to an address at a strip mall in Forth Worth, Texas. A month later, Kronos Polo sold Mexico Pacific to another firm, Mexico Pacific Holdings, LLC, which is registered to another strip mall in Delaware, as IEEFA detailed in its report. That was the fifth corporate turnover in less than five and a half years.

Registering companies at tiny offices is not necessarily uncommon in the corporate world. But for Mexico’s premier LNG project to be registered to such an unremarkable store front, it does not suggest an atmosphere of confidence or inevitability. 

Meanwhile, Mexico Pacific saw similar turmoil in the C-suite. In the last seven years, the company has gone through six CEOs. In March, chief executive Sarah Bairstow departed, jumping ship to Woodside Energy, taking a position as a senior vice president.

That came after the company laid off its staff in its Houston office, and moved its headquarters to Mexico City.

“This constantly shifting cast of characters” points to significant problems within the company, Clark Williams-Derry, a financial analyst at IEEFA, told Gas Outlook.

That management dysfunction “coincided with strategic drift, permitting oversights, rising costs, and critical delays that have dissipated the company’s momentum,” the report said.

He pointed to missteps and errors as Mexico Pacific sought approval from the U.S. government. The company originally filed for a specific volume of gas capacity with the U.S. DOE in 2018, but a few years later increased the requested export capacity on the permit. It also admitted that it didn’t account for volumes of gas needed to power its equipment, an oversight that went uncorrected for more than four years. 

“They were fishing around for the right combination of volumes and design. Meanwhile, their permitting wasn’t keeping pace,” Williams-Derry said.

He said these were not minor errors, but evidence of a larger problem with execution.

“Forgetting to ask for enough gas to run your liquefaction facility. That’s a problem, right?” Williams-Derry said.

“When you start looking at the details of the financial transactions, the leadership churn, and frankly, the outright errors that were being made, you see a picture not of a financial juggernaut, but of a jalopy that is being held together with duct tape and wire,” he said.

“And so, it looks to me like a project that really didn’t understand how to build an LNG terminal.”

On June 18, 2025, Mexico Pacific filed for an extension on its export authorisation from DOE, seeking another seven years on its deadline to begin exports. The company admitted it is “unlikely” to announce a final investment decision before its permit expires at the end of 2025, so is asking to have until 2032. It cited a series of factors negatively impacting the project, including the pandemic, cost inflation, the Biden-era LNG “pause,” the Trump trade war, and other political uncertainties.

Mexico Pacific has already spent $300 million preparing the project.

External headwinds

The problems within the company on its own would be enough to slow down momentum for Saguaro LNG. But as Mexico Pacific itself admitted in its application for a license extension, the project has been assailed by forces outside of its control, and the commercial logic of exporting U.S. gas from Mexico faces daunting obstacles.

As Gas Outlook previously reported, organized crime and cartel violence in Sonora and Sinaloa has increased dramatically in recent years, although the impacts on the oil and gas industry are more nuanced than one might think. In some cases, instability could benefit fossil fuel projects by inhibiting community opposition. An earlier buildout of gas infrastructure in northeastern Mexico occurred at a time of intense violence.

But the perception of heightened security risk also makes lenders and equity investors more skittish, posing real problems for Saguaro LNG, which needs to convince financiers to put up somewhere between $15 and $20 billion to build a long-distance pipeline and LNG terminal.

On top of that, trade tensions between the U.S. and Mexico linger, and may not go away until at least the end of Trump’s term in 2028.

“The Presidential transition in the United States in January 2025 has contributed uncertainty as to how U.S.-Mexico trade relations might evolve,” Mexico Pacific said in its latest filing. “All of these changes have contributed to general uncertainty in the capital markets. The result has been hesitancy on the part of sector participants to make substantial long-dated commitments of capital.”

Meanwhile, the global market for LNG has become more volatile and the long-term outlook is deeply unclear. A wave of supply is coming online, expected to create a glut between 2027 and the early 2030s.

Saguaro LNG is already trying to renegotiate contracts with its customers, seeking higher prices to cover labour and construction cost inflation. But demand in Asia has shrunk this year, an indication that Asian customers — including the major buyers of China and India — are price sensitive. Mexico may need higher prices, but buyers may not be able to stomach levels needed to make the LNG pencil out. That could leave Saguaro LNG at an impasse.

Mexico Pacific did not respond to a request for comment from Gas Outlook.

IEEFA added that Saguaro LNG faces legal risks in Mexico and the U.S., including lawsuits challenging environmental permits in both countries. In Mexico, the tourist and fishing industries, along with the environmental community, oppose LNG because it could result in irreparable environmental damage.

As Gas Outlook reported, multiple LNG projects are planned for the Gulf of California, one of the most biodiverse marine ecosystems in the world. A study from the Universidad Autónoma de Baja California Sur concluded that Saguaro LNG would be the leading cause of death for large whales in the Gulf, and threaten dozens of other species.

“The Saguaro Project is the biggest threat for Mexico’s climate commitments and its biodiversity,” said Pablo Montaño, the general coordinator of Conexiones Climaticas, a Mexican NGO. “We celebrate every setback that this and other LNG projects accumulate, but if they were to move forward, they will also face a well-organized and numerous social movements in favor of the whales and our territory.”

Taken together, the mounting risks to the project should give investors pause, IEEFA warned.

“Lenders in equity investors ought to be taking a look at this thing very closely because this is a project that has been mismanaged and is throwing up major red flags,” Williams-Derry said. “Anybody who actually wants to get their money back out of this investment ought to be considering other options for what to do with their money.”

(Writing by Nick Cunningham; editing by Sophie Davies)