According to two people with direct knowledge of the situation, the U.S. liquefied natural gas (LNG) company New Fortress Energy (NFE.O.) and the Mexican national energy giant Pemex signed an agreement a year ago to build what may be the country’s first deepwater natural gas project. According to the two individuals, Pemex is now in discussions with other firms to pursue the development of the Lakach gas field in the Gulf of Mexico. The sources did not identify the other companies involved.

Nevertheless, one of the sources mentioned that the project, which was previously shelved in 2016 due to excessive costs, has already incurred costs above one billion dollars.

An estimated 900 billion cubic feet of natural gas are found in the Lakach field, which is 90 kilometers (56 miles) from the Gulf port of Veracruz. However, disagreements over how to develop the project and rising costs have hampered it.

According to one of the individuals, Pemex decided to scrap the project last month because NFE was trying to enforce requirements that Mexican authorities found intolerable, such as NFE purchasing natural gas from Pemex at a meager price. The other source noted that it would be difficult for Pemex to proceed with the project and said that Lakach had grown too costly for NFE.

NFE or Pemex did not answer requests for comments. The national hydrocarbons regulator (CNH) expressed worries about Pemex’s capacity to manage the ambitious project. Still, Mexico’s president, Andres Manuel Lopez Obrador, stated that it may be essential to the nation’s supply of much-needed natural gas.

Pemex had intended to deliver 110 million cubic feet per day (mcfd) to the domestic market in addition to selling 190 million mcfd of gas to NFE. The first quarter of 2024 was scheduled to see the commencement of production.

Before the current government took office, Pemex had already spent $1.4 billion developing Lakach but had given up on it. NFE then consented to contribute an extra $1.5 billion to supplement that original investment.

Pemex intended to work with the American corporation to develop Lakach under a service contract, a method employed before Mexico’s energy sector opened for business in 2013–2014. According to earlier reports from Reuters, Pemex and CNH executives couldn’t agree on developing Lakach and other sizable areas.

Drilling expenses were excessively high, and production was overstated in the Pemex-drafted plan, according to regulator officials’ first assessment. After Pemex changed the proposal, the regulator finally gave it the all-clear.

NFE notified the U.S. Department of Energy last week that it is set to start running a floating LNG export facility off the port of Altamira in Tamaulipas and that it has begun assessing a new LNG onshore project in the Gulf state.