Mexico LNG threatens “world’s aquarium”

There are big plans for LNG on Mexico’s Pacific Coast, which could turn the country into the fourth largest LNG exporter in the world. But Mexico LNG projects would exacerbate climate change and damage one of the most biologically diverse marine environments in the world.

(Ensenada, Baja California, Mexico) The U.S. gas industry is closing in on one of its long-held dreams — carving out an export route to Asia from the Pacific Coast of North America.

A strategic priority for the gas industry since the early years of the shale revolution, LNG export terminals situated on the Pacific would cut transit times, lowering the cost of exporting American gas to Asia. It would ease a supply glut, raising prices and juicing profits for producers. And it would unleash a new round of drilling as access to global markets expands.

If successful, in the next couple of years American gas from the Permian basin could begin flowing in very significant volumes to the Pacific Coast, where it will be liquefied, put on to tankers, and exported to China, Japan, Korea, and other countries in Asia.

But there’s one twist in this tale. The gas will be exported not from the U.S., but from the Pacific Coast of Mexico.

Progress towards this vision is evident in Ensenada, in the Mexican state of Baja California, about two hours’ drive south of San Diego. Sempra Infrastructure is overhauling an existing import terminal to instead ship gas abroad. On several sunny days in October, construction continued apace. Trucks came and went, carrying material. Cranes loomed over the large gas storage tanks. Workers scurried around the construction pads.

Called Energía Costa Azul, it is expected to be completed in 2026. At full capacity, it will ship 3.25 million tonnes of LNG per year to Asia — a modest amount, as far as LNG terminals go — using gas that was produced in New Mexico, Utah, and Wyoming.

When it comes online it will be the first gas export terminal on Mexico’s Pacific Coast. But it may not be the last, nor will it be the largest. There are five other major LNG projects in various stages of development. Taken together, they represent more than 60 million tonnes of annual LNG export capacity (mtpa), or almost 8 billion cubic feet per day of gas. That is equivalent to more than 80 percent of Mexico’s total current consumption of gas, and if all were built, Mexico would become the fourth largest LNG exporter in the world.

A coalition of Mexican environmental groups are sounding the alarm at what they call the gas “mega-project.” LNG terminals will supercharge tanker traffic in the Gulf of California, threatening a unique marine bioregion that receives millions of tourists each year. It will also unleash carbon bombs that will exacerbate the climate crisis. And shipping massive amounts of gas abroad could drive up prices for gas in Mexico, a country that is heavily dependent on Texan gas for its economy.

“The Mexican government has said that [gas] is basically the energy of the future. They describe it as clean energy, which of course, is completely false.”

Pablo Montaño, the general coordinator of Conexiones Climaticas, a Mexican NGO.

He said that the energy transition risks making billion-dollar investments obsolete in only a few years’ time.

Industry forecasts predict steady growth in the LNG trade through mid-century. But future LNG demand is highly uncertain. The International Energy Agency estimates that existing LNG export capacity around the world, along with those projects already under construction, will provide enough capacity to meet global demand through 2040. The need for any additional LNG export capacity beyond what is already planned — such as potential LNG from Mexico — is more speculative.

The IEA estimates that if governments act aggressively to tackle climate change, the business case for new LNG begins to fall apart, and most of the LNG projects under construction today “would struggle to recover their invested capital.”

In other words, major investments in LNG projects in Mexico would be done on the premise that the world blows far past its climate targets.

Montaño said that Mexico is gambling on an industry whose days are numbered. “What is it going to happen with the stranded assets in Mexico? What’s going to happen with the thousands of kilometres of gas pipelines?”

Commercial Interest is Mixed

It’s not clear that all, or even most, of the half-dozen LNG projects will go forward. A handful of smaller proposals further down the coast have seen their momentum stall as they struggle to gin up commercial interest.

But there is significant momentum for at least two. The aforementioned Energía Costa Azul is already under construction and is nearing completion. But it is relatively small and is a retrofit of an existing import terminal.

The stakes are significantly higher for the vastly larger Saguaro Energy LNG project, planned for the state of Sonora, located inside the Gulf of California.

Saguaro Energy is viewed by both proponents and critics alike as the linchpin for the whole notion of exporting LNG from Mexico. If it goes forward, then Mexico can become a major LNG exporter. If it doesn’t, then it won’t.

Saguaro is significant for several reasons. First, because of its size. It would have two phases, each with a capacity of 15 mtpa. It will be enormous, especially if the second phase proceeds, putting it on par with some of the largest LNG terminals in the U.S.

Second, it would finally connect the Permian basin to the Pacific Ocean. Saguaro LNG would entail a long-distance pipeline that runs from West Texas, across the U.S.-Mexico border, through the Sonoran Desert, terminating at the Gulf of California. If it is completed, then huge volumes of Permian gas can reach the Pacific Ocean, and then be exported to Asia.

Momentum is seemingly on the project’s side. Saguaro Energy has nearly all the permits it needs in Mexico and support at the highest levels of the Mexican government. It has commercial contracts with LNG traders and customers in Asia for more than 90 percent of the capacity for the first phase of the project, including deals with ExxonMobil, ConocoPhillips, Korea’s Posco International, and China’s Guangzhou Development Group and Zhejiang Energy, among others.

The last major piece of the puzzle, then, is obtaining financing. At roughly US$15 billion, that is not a trivial matter. Up until recently, Mexico Pacific Limited, the company behind Saguaro LNG, projected confidence that it was nearing the finish line on reaching a deal with investors and financial backers, predicting that it would make a final investment decision in early 2025.

“People are starting to recognize that the next big wave of lower-cost LNG that has higher reliability that the market really needs now will be the West Coast of Mexico,” Mexico Pacific’s CEO Sarah Bairstow said in a November interview with industry publication Hart Energy. “And so, while we’re very proud that people are understanding and supporting our project, it represents so much more than just our project. It represents a whole new supply point.”

But the project is stalling, weighed down by political, financial, and security risk. As Gas Outlook reported , constructions costs are unknown, and organized crime in Sonora is a big red flag for a project that requires a long-distance pipeline through remote desert territory controlled by drug cartels. Some analysts believe the project is beginning to fall apart.

Mexico Pacific is reportedly trying to renegotiate contracts with buyers to cover its ballooning costs. Against these headwinds, an FID is not imminent.

However, it is not dead yet. If the company can overcome these challenges, then it can unlock a vast new market for U.S. gas.

“World’s Aquarium Under Threat”

One of the main selling points for Saguaro LNG is that it offers Asian customers a Pacific route for North American LNG. Gas shipments can bypass the Panama Canal, which has become less reliable in recent years as climate change alters precipitation patterns, causing disruptions in ship traffic. Currently, some U.S. Gulf Coast LNG tankers must travel around South America or Africa to arrive in China or Korea. Instead, from Mexico’s West Coast, gas shipments could sail straight across the Pacific.

But before it even reaches the ocean, LNG tankers would load up on gas on the coast of Sonora, then traverse the Gulf of California, a 1,100-km stretch of crystal-clear water full of fish, sharks, and whales. Experts say that LNG ships would threaten precious ecosystems and the regional economy.

“The Gulf of California is one of the greatest and most biodiverse areas in the world,” Frida Lara, science coordinator for Orgcas, a Baja California Sur-based marine conservation organisation, told Gas Outlook.

There are around 900 species of fish and over 300 species of marine birds.
The Gulf of California “is just after the Galapagos in terms of the most diverse places in the world to see all these species,” she added.

The famed oceanographer and filmmaker Jaques Cousteau called the Gulf of California the “world’s aquarium” because of its ecological splendour.

Perhaps the most iconic are the species of whales. Grey whales give birth to their young in the Gulf of California, spend a few months in the lagoons feeding, and then migrate up to Alaska and the Arctic. Maintaining a healthy ecosystem in the Gulf of California is critical to their continued existence.

The biological abundance is also essential for people. The Mexican communities in Baja California Sur rely very heavily on the marine environment, both for food and for tourism.

“In Baja California Sur we have a very limited amount of water, so that doesn’t allow us to have agriculture or other industry that is common in other parts of Mexico,” Lara said. “Mainly here people live off artisanal fishing. There is not a lot of industrial fishing going on. There are 6,000 fishermen that live in little tiny towns in this area.”

The picturesque landscape also attracts a steady stream of tourists, where Saguaro cactus grow on craggy hillsides right up to the edge of the blue-green sea.

Millions of tourists visit Baja California Sur each year. While mass tourism has its own set of problems, the tourist industry is a key part of the economy. Whale watching, scuba diving, sailing, and fishing are big business.

“But if we don’t have the biodiversity that bring people here, basically, I don’t think they will come,” Lara said.

That threat could be felt all the way down the peninsula. La Paz, the capital of the state of Baja California Sur, is a small city that depends on tourism. Carlos Mancillas, the director of BCSicletos, a local cycling and community-focused NGO, said that the prospect of a sudden increase in LNG tanker traffic “threatens and discourages the arrival of tourists and jeopardizes the survival of thousands of local jobs linked to nature tourism.” He said fishing has been a source of financial support for generations, and that would all be put at risk.

Currently, the Gulf has very little ship traffic. “It’s very quiet,” Lara said. Some industrial fishing ships from outside the state sometimes come into the Gulf, but only at certain times of the year. “Other than that, you only have small fishing boats, a couple of tourist boats, but not many, and sailing boats, which don’t make any noise.”

That could all change if the LNG plants go forward. Traffic from massive LNG tankers would bring new threats. Noise from tankers would endanger whales, who need to communicate with one another.

Lara said there is evidence that suggests noise is already becoming a problem. Some research indicates that whales are beginning to “talk” louder than they were before so that they can hear each other.

LNG tankers are much larger and louder than anything that currently exists in the region. Conexiones Climaticas said the transformation from today’s mostly tranquil Gulf to one with several LNG plants would be akin to turning a dirt road into a four-lane highway.

Collisions with ships are another hazard. Lara said she’s concerned about blue whales in particular. As the largest living creature on the planet, they have never needed to worry about a predator larger than themselves. As such, they tend not to avoid oncoming ships even when they know they are nearby.

“It’s not a problem of detection. It is about the evolution of not having any predator or anything to be dangerous for them,” Lara said. “That’s why they don’t move.”

Marine life in the Gulf of California is unique and abundant, but it is also very fragile, she said.

In response to questions from Gas Outlook, Sempra Infrastructure, which is developing the Vista Pacifico LNG (VPLNG) project in the state of Sinaloa, said that it expects ship traffic to increase up to 5 percent.

“At Sempra Infrastructure we believe that the protection and preservation of the environment can be compatible with the responsible development of energy infrastructure,” a spokesperson from Sempra Infrastructure said.

Sempra added that it has run a marine mammal protection programme at the Energía Costa Azul LNG terminal in Baja California since 2003. “Developed alongside local biologists, the programme is designed to monitor marine mammals to prevent obstructions or collisions with tankers during migration periods, with zero incidents recorded to date,” the spokesperson said. However, that project is outside of the Gulf of California. The risk from Sempra’s Vista Pacifico, inside the Gulf, would be different.

Critics say any potential economic upsides from LNG exports would be dwarfed by the losses of other sectors of the Mexican economy, from fishing to tourism. “The Mexican government is playing with fire,” Montaño from Conexiones Climaticas said.

Mexico Pacific, the developer of Saguaro LNG, did not respond to multiple enquiries and requests for comment from Gas Outlook.

But at Gastech 2024 in Houston last September, Mexico Pacific CEO Sarah Bairstow insisted that the project is setting high standards for environmental protection. “We feel like we are lifting the bar on a standard of development in being the first project in Mexico to have a pipeline, an LNG facility, and a shipping route that is designed to avoid every environmentally sensitive area,” she said. “So that means we have a grass-root level of support.”

A recent 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 of California, and pose hazards to 30 other major marine species in the region. The study says the LNG project should not be built.

Plan Sonora

The west coast of Mexico is littered with LNG proposals. In addition to Saguaro LNG in Sonora, there is the 7-mtpa Amigo LNG a little further south. The 4-mtpa Vista Pacifico LNG, backed by Sempra Infrastructure, is planned for the state of Sinaloa. In Colima, there is the proposed 4-mtpa Gato Negro LNG, along with a smaller 3-mtpa Salina Cruz LNG in Oaxaca, which would be used as a bunkering terminal.

But the plans for the Pacific coast go beyond LNG. The national government along with the state of Sonora, and international companies and investors, have collaborated on a constellation of heavy industry projects for the region. Called “Plan Sonora,” the vision amounts to a large-scale industrialisation of the Gulf of California.

LNG sits at the heart of Plan Sonora, but there are also plans for lithium mines, green hydrogen, transmission lines, semiconductor plants, and solar projects . In Sinaloa, there is also a proposed green methanol facility by a Texas-based company.

Mexico Pacific says the U.S. and Canada support Plan Sonora and it “is this tripartite effort where everybody sees the ability to grow out and create a hub off the West Coast of Sonora,” Bairstow told Hart Energy in November.

But details have been sparse, and critics say the state and national government have not been
transparent. While the government has slapped green branding on the strategy, the largest component of the framework appears to be the LNG export terminals.

The overarching strategy is aimed at positioning Mexico to capitalise off of the growing shift towards “near-shoring,” or the desire by American companies and the U.S. government to locate strategic industries closer to home.

Some Mexican civil society groups fear that such a trend merely doubles down on a problematic economic growth model. Plan Sonora risks deepening Mexico’s “subordination” to the United States as a region where low-wage labour and extractive industries are set up simply to serve the American economy, a Mexican research organisation called Geocomunes warned in a recent report .

They point to the peculiar relationship that sees Mexico importing gas to use in low-wage manufacturing facilities in northern Mexico near the U.S. border, only to produce goods that are then exported back to the U.S. In the past few decades, the regional economy in the Mexican borderlands has broadly been configured to serve American interests, and building new mines, gas pipelines, and LNG export facilities could exacerbate this dynamic, Geocomunes argued.

Northwest Mexico, because of its proximity to U.S. shale fields, “has become a key piece in the new territorial puzzle of the American fossil fuel industry,” the report said.
Mexico Pacific has described Plan Sonora as the “key” to giving the company confidence to invest. “For us, it was the Sonora Plan. It was a very clear and well-articulated platform around attracting energy infrastructure to the region,” Bairstow said at Gastech last year.

The government of Sonora did not respond to requests for comment from Gas Outlook.

But that was all before the inauguration of President Trump. The sunny vision of North American economic integration is outdated. From Mexico’s perspective, relying on the U.S. market for the health of its own economy is now a worrying vulnerability. Trump launched an unprovoked trade war in March, which included a 25 percent tariff on goods coming into the country from Mexico, although he decided to temporarily exclude products that fall under the free-trade agreement between the two countries. He also imposed tariffs on steel and aluminium. More sweeping trade penalties are in the works.

The extreme uncertainty that Trump has injected into commercial relationships of all kinds is casting a dark shadow over the entire vision of Plan Sonora, including for LNG, to say nothing of the broader economic dependence that Mexico has on its northern neighbour. It is hard to imagine investors feeling confident about going forward with multi-billion-dollar projects, which have commercial prospects predicated on good cross-border relations, at this particular moment in time.

Mexico Pacific has said very little publicly about the deteriorating trade relationship between the two countries, or what it might mean for Saguaro LNG. The company did not respond to questions from Gas Outlook.

A coalition of Mexican environmental groups are campaigning against Saguaro LNG, under the banner of ballenas o gas (whales or gas), with the obvious implication that the health of the Gulf of California’smarine life is not compatible with LNG.

They have also blasted Saguaro LNG as the largest climate threat in the country. The greenhouse gas emissions from the project could total 73 million tonnes of CO2 equivalent, roughly equal to the annual emissions of 17 million cars, according to an analysis from Iniciativa Climática de México (ICM), a Mexico City-based NGO. But that figure only accounts for the first phase of the project; a second phase would double that total.

“[I]nvestment in assets that continue to favor the use of fossil fuels such as natural gas goes against the climate urgency, in addition to opposing the global goal of achieving net zero emissions by 2050,” the ICM report found. Saguaro LNG “could represent a barrier to climate efforts not only globally, but also those of Mexico.”

In response to questions from Gas Outlook, Sempra Infrastructure cited an industry-backed study that finds that LNG offers climate benefits over alternative sources of gas and coal.

Mexico already has been criticised for dragging its feet on climate action, with its pledge to cut emissions by 22 to 35 percent not against a specific baseline, but against a business-as-usual trendline — a framework that will allow emissions to continue to rise. That plan was deemed “critically insufficient” by Climate Action Tracker.

Mexico is suffering the intensifying effects of the climate crisis. In 2023, Hurricane Otis made landfall as the first Pacific Coast Category 5 hurricane. It tore through Acapulco, inflicting US$12-$16 billion in damages . In other words, a single storm inflicted economic damages at a scale that wipes out the supposed benefits of the $15 billion Saguaro Energy LNG, a project that, in turn, will produce emissions that will only worsen climate change.

Former President Andrés Manuel López Obrador pursued an oil and gas-focused energy policy. Last fall newly-elected President Claudia Sheinbaum announced an aim to hit net-zero emissions by 2050, and because she is a climate scientist, she has raised some hope that she would be more ambitious than her predecessor. But whether she meaningfully charts a new course on climate remains to be seen.

For now, she has been a steadfast supporter of Saguaro LNG and other gas export proposals. The coalition of Mexican climate groups is making Saguaro Energy a litmus test. They are calling on the Mexican government to stop the project. They argue that the environmental assessment for Saguaro LNG is outdated, does not consider climate impacts, and ignores serious threats to the Gulf of California.

Mexico’s Ministry of Environment and Natural Resources did not respond to repeated inquiries from Gas Outlook. The Secretariat of Energy also did not respond.

“There’s no way” the project can stand up to proper scrutiny, Montaño from Conexiones Climaticas said. And if Saguaro LNG goes forward on the Sonoran coast, along with a host of other industrial projects, the fallout for the region could be significant.

“If the entire project of industrialization of Sonora and Sinaloa happens, then it’s not only going to be one project or one series of tankers coming and going through the Gulf of California. It’s going to be a massive amount of traffic, noise, and pollution.”

Pablo Montaño, general coordinator of Conexiones Climaticas

“It’s going to be a disaster for the Gulf of California.”

(Writing by Nick Cunningham; editing by Sophie Davies)

This is the second installment of a two-part investigation into LNG projects along Mexico’s Pacific coast. Read the first part here.