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Repsol wins Mexican LNG bid Marathon, Sempra LNG projects battling red tape, lawsuits Debra Beachy Petroleum News Contributing Writer
Marathon Oil Corp. scrapped its Mexico liquefied natural gas project this week, barely two weeks after Mexico awarded Repsol YPF a site to build a regasification plant in the Pacific port of Lazaro Cardenas.
The Marathon project’s demise came as LNG projects in Mexico battle red tape, political problems and environmental concerns. Another Mexican Pacific Coast LNG project involving Sempra Energy also has run into problems with a tourism resort, according to those familiar with the case. Tourism is a major industry for the state of Baja California, renowned for luxurious resorts such as Cabo San Lucas. Even Repsol’s LNG project could be in doubt, officials said, if plans to import Bolivian gas to Mexico don’t go forward.
Marathon officials said the company has shelved plans to build a $1.7 billion regasification plant in Tijuana, because the state of Baja California expropriated the land where the project would have been built. Months of negotiations went nowhere, the officials said.
The project would have included an LNG terminal, two power plants, a wastewater treatment facility and a desalinization plant. Marathon spokeswoman Susan Richardson said the company was surprised and disappointed by the expropriation. “The decision to expropriate the land was obviously a signal that the state officials did not support the project,” Richardson said. Marathon was the first foreign oil company to win a permit for an LNG facility in Mexico. She said the company would not consider another site.
“It isn’t possible to move. The waste water treatment plant was right beside the site,” she said. Mexico sending mixed signals on LNG While the Lazaro Cardenas award should breath new life into projects that have been lagging, mired in red tape or political problems, the expropriation and cancellation of the Marathon project will send the opposite signal, said oil analyst George Baker, owner of Houston-based Mexico Energy Intelligence.
“It’s beginning to resemble a Greek tragedy, where the players are dying on stage,” joked Baker.
The expropriation could raise red flags to oil companies doing business in Mexico, since Mexican President Lazaro Cardenas nationalized foreign oil company’s holdings in 1938, Baker noted.
“The strong impression from news reports is that the decision to expropriate the Marathon site was taken without the prior approval of the executive branch — or even without prior consultations,” he said.
Meanwhile, Repsol YPF announced it was awarded the bid for the Lazaro Cardenas $10.1 million regasification plant, which would go on stream in 2008. The plant would have an initial capacity of more than 4 billion cubic meters a year, with a revamp potential of up to 10 bcm a year, Repsol YPF said in a prepared statement. Bolivia gas in doubt The site would give Repsol YPF the sought after facility it needs to export Bolivian gas to Mexico, a central plan of the Pacific LNG project that Repsol YPF leads. However, the Pacific LNG project is itself in doubt. Its approval hinges on the results of a national referendum in Bolivia scheduled for April. The referendum was called after violent protests last year in Bolivia against the LNG project and free trade policies forced the resignation of President Gonzalo Sanchez de Losada. Repsol YPF CEO Alfonso Cortina recently said the company may even sell the Lazaro Cardenas site if the Pacific LNG project can’t go forward.
Another setback for Mexico Pacific Coast LNG projects came in December when the permit for an LNG project planned by Sempra Energy was suspended as the result of a civil lawsuit filed in December by the tourist and golf resort Baja Mar, which claimed the LNG plant would negatively impact the tourism site, Baker said.
Mexico’s President Vicente Fox is scheduled to meet with Baja California leaders in a visit to the state on March 10.
At least four energy companies plan to develop LNG receiving terminals on Mexico’s west coast and at the port of Altamira, on its east coast. They include Repsol YPF, ChevronTexaco, Sempra Energy and Shell Oil.
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