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LNG projects gain; Exxon drops Mobile plans Western U.S. projects moving: Sempra gets go-ahead for Mexican terminal, while Woodside joins in offshore project Allen Baker Petroleum News Contributing Writer
Sempra Energy’s proposed Mexican LNG terminal now has all its permits in hand and the company is planning to start major construction in the next couple of months, giving it a jump on other projects seeking to serve the California market.
“We have all our permits in hand,” said Art Larson, a spokesman for San Diego-based Sempra. “We’re going forward. We have already started building the access road to the project, and major construction begins late this year or early next year.”
The terminal and associated pipelines are expected to cost about a billion dollars, with facilities to regasify a billion cubic feet of gas daily when the project is finished in 2008, he said. Half of that would initially go to the Mexican market. If future demand warrants more capacity, “we do have room to increase the size of the facility based on the land we have.”
The facility, called Energia Costa Azul, is 14 miles north of Ensenada and about 40 miles south of the U.S. border. It will connect with a 140-mile east-west pipeline owned by Sempra International, which will provide access to markets in Mexico and Arizona. Woodside moves in Meanwhile, a rival terminal project just north of Los Angeles got a boost when Australia’s big Woodside Petroleum Ltd. joined forces with Crystal Energy LLC on its Clearwater Port project.
The plan there is for an old offshore oil platform to be turned into a docking facility for LNG tankers and a regasification center at a cost of about $350 million. Despite the port’s location 12.6 miles off the coast, the plan has drawn sharp opposition from the community of Malibu, which sits on the coast nearby.
Woodside adds a lot of muscle to the project. It is Australia’s second-biggest oil company, and has an extensive track record in the LNG arena, operating Australia’s huge North West Shelf LNG venture that has sent out more than 1,600 tanker loads.
Under the deal with Crystal Energy, formed specifically to develop the facility, Perth-based Woodside will help design the terminal and has agreed in principal to be the operator. It also gets 80 percent of the terminal capacity.
“Woodside has substantial gas reserves and world-wide experience in LNG production and transportation while Crystal provides an ideal potential entry point to the world’s largest gas market,” said Don Voelte, Woodside’s chief executive officer.
Crystal has applied to the U.S. Coast Guard for a deepwater port license that would allow conversion of the Grace oil and gas platform into an unloading and regasification facility.
There will be no LNG storage at the platform, which sits in 97 feet of water. The terminal will be able to handle about 800 million cubic feet daily, converting roughly 6 million tonnes of LNG annually. The gas would be gas piped along existing easements to onshore infrastructure.
Crystal filed permit applications in February and has signed a long-term lease for the platform. A 54 percent majority of Crystal’s shares are owned by Small Ventures USA LLC, which in turn is owned by William O. Perkins III, who is Crystal’s chairman. The agreement is with Woodside (USA) Energy Inc., a wholly owned subsidiary of the Australian firm. Second Aussie entry Woodside isn’t the only Australian company with an interest in an offshore LNG terminal in southern California. BHP Billiton is proposing another offshore project a bit farther north, with a cost of $600 million and a capacity of 1.5 billion cubic feet daily. There are other projects on the drawing board — involving ChevronTexaco, ConocoPhillips, and Marathon — to serve the huge market.
It’s unlikely all of them will end up being built, but there is currently no terminal for importing LNG on the western coast of North America. And there are big LNG production centers ramping up in Asia, including projects at Sakhalin Island and around Australia and Indonesia.
But the West Coast market would have to grow substantially to support more than a couple of the costly terminals. The Sempra facility alone could supply roughly 15 percent of California’s total current consumption of about 6.5 billion cubic feet daily.
Sempra recently signed supply agreements for LNG from the Sakhalin project led by Shell and from Indonesia’s Tangguh project, led by BP. The two 20-year contracts involve more than 110 million tons of LNG valued at around $18 billion.
Shell controls half of the initial capacity of 7.5 million tons of LNG annually at the Sempra terminal, and holds an option on half of any capacity additions there. ExxonMobil drops Mobile ExxonMobil has shelved its plans for a $600 million terminal on Mobile Bay in Alabama, deciding Oct. 28 not to keep its option on a former Navy base that would have been the terminal site. The company planned a capacity of as much as 3 billion cubic feet daily, with the LNG coming from Qatar.
The Irving, Texas, company said it had made progress on several other LNG terminal sites and it was no longer in ExxonMobil’s interest to maintain the Mobile site by making a $1.2 million option payment due by Nov. 1. The company originally bought the option on the site from the Alabama State Port Authority in October of 2003, and had already made $1.75 million in option payments.
But like many other LNG proposals, it ran into heavy local opposition from residents concerned about accidents or terrorist attacks. Among those questioning the terminal on safety concerns was Alabama Gov. Bob Riley.
Mitsui and Co. Ltd. has signed up to acquire a 25 percent equity share of a proposed LNG terminal at Altamira, Mexico, from Shell Gas B.V. Planned capacity at the terminal is about 1.1 billion cubic feet daily, and the terminal consortium has a 15-year supply contract with the Mexican Comision Federal de Electricidad.
With the Mitsui investment, Shell will retain a 50 percent interest and Total will have 25 percent. The agreement was announced Nov. 2.
More than 40 LNG terminals are at various stages of planning or development in North America, with four currently operating. Those four have a capacity of about 4.5 billion cubic feet daily.
Construction was started recently on one new terminal in eastern Canada. Anadarko Petroleum Corp. of Houston started work in late October at Bear Head, on Cape Breton Island in Nova Scotia. That terminal has a planned capacity of a billion cubic feet daily. Completion is planned for late 2007.
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