Page 4 - GLNG Week 21 2022

GLNG COMMENTARY GLNG

IEnova facing one less

obstacle to ECA LNG project

COMMMENTARY EARLIER this month, IEnova, the Mexican unit they stopped making the payments due to IEn-
of US-based Sempra Energy, quietly moved one ova under their agreements for LNG regasifica-
step closer to launching the first stage of the LNG tion and storage. In turn, IEnova responded by
export terminal it intends to build at the Energia rejecting the two companies’ claims and drawing
Costa Azul (ECA) site in Baja California. on the letters of credit (l/c) they had provided as
According to a report from Global Arbitra- security. Gazprom resumed regular payments in
tion Review, Sempra revealed in the first week of 2020, after formally joining Shell in its request
May that a tribunal of the International Chamber for arbitration, but IEnova continued to draw on
of Commerce (ICC) arbitration court rejected Shell’s l/c.
an attempt by units of Shell (UK) and Gazprom Meanwhile, Shell cast a wider net and sought
(Russia) to terminate agreements signed in to challenge Sempra in court. More specifically,
2009 for the use of LNG storage facilities on the it filed two suits in Mexico’s constitutional court
Mexican coast. The storage facilities in question in 2020, seeking on the one hand to overturn
are located at ECA, where IEnova has already CRE’s approval of the updated ECA terms and
built a regasification terminal for the purpose of conditions and on the other hand to rescind the
importing natural gas into Mexico and the US. issuance of IEnova’s gas liquefaction permit.
Global Arbitration Review’s report could
not immediately be confirmed. If it is correct, Legal defeats
though, the ICC has effectively put to rest a legal These efforts have not been successful. Mexico’s
dispute that has been simmering since 2020, constitutional court denied its request to stay
when Shell Mexico and Gazprom Marketing and approval of the update to the terms and con-
Trading Mexico began seeking arbitration. They ditions in October 2020 and then upheld that
took this step in response to IEnova’s announce- rejection upon appeal. The same court then
ment in 2019 of an update to the general terms rejected its call for rescinding the liquefaction
and conditions for use of the ECA regasification permit in March 2021 and once again upheld
facility. this ruling upon appeal.
Even though the Sempra subsidiary had The case then came to the ICC arbitration
secured approval for those changes from Mex- court for hearing in October 2021, and accord-
ico’s Energy Regulatory Commission (CRE), ing to Global Arbitration Review, this round of
Shell and Gazprom asserted that they repre- debate has also ended in IEnova’s favour. The
sented a breach of the 2009 contracts and a basis ICC has yet to issue an official statement on the
for declaration of force majeure. Accordingly, matter, and the companies involved have said

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