New Fortress Creates $2 Billion JV, Inks Two Mexican Deals

New Fortress Energy Inc. agreed to form a new joint venture (JV) for LNG maritime infrastructure valued at $2 billion while also inking separate deals to supply gas to Mexico’s domestic market and for export.

The announcements help New Fortress provide low-carbon energy to consumers in the Americas and worldwide as part of a global energy transition from oil and coal, the company said July 5 in a press statement.

The JV partnership—with Apollo Global Management Inc.—will allow New Fortress to create offshore LNG infrastructure to assist with the energy transition while freeing up capital for other investments while also allowing it to reach diversified customers from utility to energy companies worldwide under third-party charters.

“Together with Apollo, we are creating a leading LNG marine infrastructure platform to help accelerate the energy transition while freeing up capital to continue to invest into our Fast LNG and downstream LNG projects worldwide.”—Wes Edens, Chairman and CEO, New Fortress Energy

Further, deals with state-owned Petróleos Mexicanos (Pemex) and Mexico’s Federal Electricity Commission (CFE) will assist Mexico boost its energy security and allow the U.S.-based company to provide clean energy for electricity generation while establishing an LNG export hub offshore Mexico’s northern Gulf of Mexico coast.

$2 Billion JV

New Fortress signed an agreement with Apollo to “sell 11 LNG infrastructure vessels owned by NFE to a newly formed joint venture between funds managed by Apollo and NFE in a transaction valued at approximately $2 billion,” the company said. Apollo will own an 80% working interest in the JV while New Fortress will own the remaining 20% working interest.

“Energy transition and energy reliability are global priorities and core to Apollo’s sustainable investing platform. We’re pleased to further these initiatives through this long-term investment alongside our JV partners at New Fortress Energy.”—Brad Fierstein, Partner, Apollo

New Fortress will receive proceeds of $1.1 billion after considering its share of the JV and portions used to pay down existing debt. The transaction is expected to close in the third quarter and proceeds will be used to fund New Fortress’ “FLNG projects, as well as for ongoing downstream infrastructure and general corporate purposes,” the company said in the statement.

The LNG vessels include six floating storage and regasification units, two carriers and three floating storage units. New Fortress agreed to charter 10 of the 11 of the vessels for up to 20 years commencing either upon close of the transaction or upon expiration of the vessels’ existing third-party charter agreements.

Lakach Gas

New Fortress also signed a long-term strategic partnership agreement with state oil giant Pemex for the joint development of the Lakach deepwater gas field. Per the agreement, New Fortress will invest in the continued development of the Lakach Field over a two-year period and will complete seven offshore wells.

Additionally, New Fortress will deploy a 1.4 mtpa floating LNG (FLNG) unit to liquefy the bulk of the gas production from the Lakach Field. Pemex will use the remaining gas and associated condensate from the field to supply Mexico’s domestic market.

The Lakach deepwater gas field was discovered in 2007 by Pemex, which subsequently carried out exploration and development activities. Lakach, located approximately 70 km off the coast of Veracruz in southeastern Mexico, is one of the largest non-associated gas fields in the Gulf of Mexico with estimated total original gas in place of around 1.1 Tcf.

Lakach and the nearby undeveloped Kunah and Piklis fields have an estimated total resource potential of 3.3 Tcf, according to New Fortress. Both New Fortress and Pemex estimate the Lakach Field can produce for at least 10 additional years with the potential to extend its reserve life with development of nearby fields.

LNG Hub

New Fortress also entered into an agreement with Mexico’s CFE that allows the former to expand its gas supply to multiple CFE power generation facilities in Baja California Sur, divest its 135 megawatt La Paz power plant and create a new LNG hub off the coast of Altamira, Tamaulipas in northern Mexico. In the latter agreement, CFE will supply the requisite feed gas to two NFE FLNG units using CFE’s existing pipeline capacity.

New Fortress commenced commercial LNG regasification operations at a terminal in Pichilingue, La Paz, Baja California Sur in July 2021. The terminal supplies gas to CFE’s generation facilities at CTG La Paz and CTG Baja California Sur. Per the agreement, CFE and New Fortress will extend the term of New Fortress’ gas supply agreement to CFE’s power generation facilities in the region and increase the volume of gas delivered under mutually agreeable terms.

In Altamira, New Fortress will deploy two FLNG units capable of processing 1.4 mtpa each that will use CFE’s existing firm pipeline transportation capacity to deliver feed gas volumes to New Fortress. Additionally, CFE has agreed to share in the production and marketing of a portion of the LNG volumes from the new Altamira offshore LNG hub.