Mexico's oil regulator approved on Monday a revamped plan for developing the once-abandoned Lakach deepwater natural gas project, presented by state oil company Pemex, in the first public session chaired by its newly appointed head.
The Gulf of Mexico field holds up to 937 billion cubic feet of gas reserves.
Rising costs have hindered development, but President Andres Manuel Lopez Obrador said it could be key for supplying much-needed gas to the country. Officials at the National Hydrocarbons Commission (CNH), as the regulator is known, raised questions during the session about whether Pemex could shoulder the massive venture that was abandoned once before.
Under Lopez Obrador, Pemex proposed to revive the project along with U.S. liquefied natural gas company New Fortress Energy Inc.
"This is a huge investment, but also a huge uncertainty," said Alma America Porres, one of the officials. "It's very important that we supervise this (project) very strictly, much more so than others."
Pemex does not have much experience in deepwater ventures. Its flagship ultra deepwater oil project Trion, being developed along with Woodside Energy, is still pending the final investment decision.
Ultimately, all CNH officials gave the green light for Lakach, after Pemex modified its original plan.
Initially estimated to cost $1.5 billion, the regulator approved the new plan at $1.79 billion. Neither Pemex or the government commented on the decision.
Mexican laws stipulate regulatory approval requires projects be both technically and economically viable. Sources told Reuters last month that Lakach's fate could depend on the replacement for the regulator's head, Rogelio Hernandez.
Hernandez abruptly quit in September, well before his term was set to expire in 2026. Lopez Obrador recently appointed a former Pemex official, Agustin Diaz Lastra, to head the regulator.
Diaz Lastra said on Monday he was optimistic about the development.
"This is fundamental for the production of gas," he said. "We should increasingly strive to use new technologies that allow us to develop deepwater fields."
Pemex had proposed to develop Lakach with New Fortress Energy using a service contract, a formula used prior to the nation's energy sector opening in 2013-14. Under a service contract, Pemex would retain full ownership but bear the risk if prices fall. The regulator did not address the details of the contract with New Fortress Energy in its session.
(Reuters - Reporting by Stefanie Eschenbacher/Additional reporting by Ana Isabel MartinezEditing by Marianna Parraga and Marguerita Choy)