HOME PAGE SUBSCRIPTIONS, Print Editions, Newsletter PRODUCTS READ THE PETROLEUM NEWS ARCHIVE! ADVERTISING INFORMATION EVENTS PETROLEUM NEWS BAKKEN MINING NEWS

Providing coverage of Alaska and northern Canada's oil and gas industry
May 2008

Vol. 13, No. 21 Week of May 25, 2008

Sempra brings first LNG to West Coast

Terminal on Mexico’s Baja Peninsula can handle a billion cubic feet daily — but supplies could be problem in tight Pacific market

Allen Baker

For Petroleum News

The first LNG terminal on North America’s West Coast has cleared performance tests and is ready to start commercial operations.

But whether producers in the Pacific market will send significant quantities of liquefied natural gas to the port remains a question of availability, as well as price.

Sempra LNG, a subsidiary of San Diego-based Sempra Energy, said May 15 that its Energia Costa Azul port near Ensenada, Mexico, is ready to go. It cost a billion dollars.

“The start of operations at Energia Costa Azul represents the culmination of seven years of development activity involving the acquisition of permits and commercial contracts, construction, start-up and testing,” said Darcel Hulse, president of Sempra LNG. The project, he said, “has been both challenging and satisfying.”

The first test cargo arrived from Qatar April 18 aboard the Al Safliya, a new LNG carrier. A second cargo came from Trinidad May 6 aboard the Bluesky.

Those shipments were put through the terminal’s pumps, tanks and regasification system as part of performance testing, then sent out via a new $215 million feeder line into the existing network serving Mexico and California.

H

Shell and BP deals

alf the capacity of Sempra’s terminal is leased to Shell International Gas Ltd. under a 20-year agreement. At one time, Shell expected to send LNG to North America from the Sakhalin 2 project in Russia. But that was before Russia’s Gazprom took a controlling share of Sakhalin 2. In any case, Sempra will start collecting lease payments from Shell now that the facility is operational, whether ships dock there or not.

The other half of the terminal’s capacity is allocated to importing LNG from the BP-operated Tangguh project in Indonesia. Sempra’s 20-year contract gives BP plenty of latitude to simply pay Sempra for the terminal capacity and ship the gas elsewhere if it can get a better price.

Tangguh was originally scheduled to start producing LNG this year, but first cargoes are now expected in the second quarter of 2009.

In any case, the two agreements will give Sempra a flow of cash from the terminal. Whether Sempra will get a flow of gas may be another story. There’s room for expansion at the site, but that could be a long time coming.

Sole success so far

It’s a triumph for Sempra to get its LNG port into service. ConocoPhillips, BHP Billiton and others have tried to get the needed permits for a West Coast LNG terminal and failed.

More than a dozen LNG terminals have been proposed for the West Coast, but none so far has even made it to the construction phase. Even facilities far off the coast have been done-in by pressure from groups that see the facilities as an eyesore, a danger, or both.

Much of the LNG production for Pacific Rim markets — current and planned — is tied up in long-term contracts with electric and gas utilities in Japan, Korea and Taiwan. That has dampened enthusiasm for the projects, whose price tags are running in the billion-dollar range.

Also in the works for Sempra is the Cameron LNG terminal near Lake Charles, La., with initial capacity of 1.5 billion cubic feet daily.

That $1 billion project, set for completion late this year, won’t have the same monopoly position, but it will be in the Atlantic basin market, which has a less-daunting supply-demand balance. At the same time, there’s already plenty of spare import capacity among the LNG terminals already in service, as well as new ones nearing completion along the Gulf Coast.

U.S. imports up

U.S. LNG imports did increase last year, after two years of decline. All of it went into the East Coast and Gulf Coast markets, of course. Overall U.S. imports increased to the equivalent of 771 bcf, a gain of 32 percent from 2006, according to the Energy Information Administration.

That boost came as a new Marathon project in Equatorial Guinea went into production and expansions were completed in Trinidad and Nigeria.

The big Trinidad and Tobago plant of Atlantic LNG sent 451 bcf to the United States, chalking up 58 percent of 2007 U.S. LNG imports. Large shipments also came from Egypt (114 bcf), Nigeria (95 bcf) and Algeria (74 bcf). Equatorial Guinea and Qatar shipped less that 20 bcf each.

But the bulk of those imports came in the warmer months, when they could go into the extensive U.S. storage system. LNG cargoes were diverted to higher-paying markets in Europe during the heating season.

U.S. imports of LNG were dwarfed by pipeline flows from Canada, which delivered a net 3,295 bcf of natural gas into the U.S. market last year, up 1.4 percent from 2006.






Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] --- http://www.petroleumnews.com ---
S U B S C R I B E

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©2013 All rights reserved. The content of this article and web site may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.