Baja LNG projects move ahead

Larry Persily

Petroleum News Government Affairs Editor

ChevronTexaco Corp. says it expects to receive permits by mid-year for construction and operation of a liquefied natural gas receiving terminal offshore of Mexico’s Baja Peninsula, less than 10 miles south of the California border.

The company, which also is pursuing construction and operation of an LNG receiving terminal 40 miles off the Louisiana coast, said it hopes to start work on its Baja project later this year and could start taking deliveries in late 2007.

The terminal’s initial load is planned at 700 million cubic feet per day, with construction estimated at $650 million, said Nicole Hodgson of the San Ramon, Calif.-based energy company. The plant will be designed to handle up to 1.4 billion cubic feet per day, she said.

Reuters reported Feb. 17 that Mexico’s Energy Regulating Commission is expected to award its key permit for the project as early as April. The terminal is proposed for eight miles offshore, near the Coronado Islands. ChevronTexaco also needs land-use and environmental permits for the terminal, and a go-ahead decision by the company’s board of directors.

The company lined up a supplier for about one-third of the terminal’s initial needs when it signed a memorandum of understanding last fall to take at least 270 million cubic feet of gas per day starting in 2008 for 20 years from Australia’s offshore Gorgon field, of which ChevronTexaco owns about 57 percent. Shell and ExxonMobil also are partners in the field, which holds more than 13 trillion cubic feet of proven reserves.

Shell also has signed an agreement to take a similar load of 270 million cubic feet per day from the Gorgon venture for its own LNG business.

ChevronTexaco has not signed up any other supply sources for its Baja terminal.

The company’s project is one of several proposed to serve U.S. West Coast and Mexican markets. Shell and Sempra Energy in December announced plans to build a terminal on Mexico’s Baja Peninsula, about 35 miles south of the U.S. border. San Diego-based Sempra signed a deal to buy its LNG — about 500 million cubic feet per day —from BP’s Tangguh field in Indonesia.

Meanwhile, Marathon Oil Corp. continues to pursue its plans to build an LNG terminal, electrical generating and seawater desalination plants near Tijuana, just south of the border. Though Marathon received its Mexican Energy Regulating Commission permit last year, the company is encountering local opposition over land-use and safety concerns, said company spokesman Paul Weeditz.

“We have not made much progress in recent months,” he said, adding that the Houston-based company will continue talking with area residents and government officials to address their concerns.

Marathon expects to buy LNG from more than one source, Weeditz said. The company last year signed a memorandum of understanding to take LNG from an Indonesia development, and Weeditz said other possible sources include Asian and South American ventures. The company is developing its own LNG operation at Equatorial Guinea on the West Africa coast, south of Nigeria, but its likely delivery points include Europe and the U.S. East or Gulf coasts.

Several other companies have proposed LNG terminals to serve the U.S. West Coast market, though most industry observers believe the market can only handle a couple of terminals, with ChevronTexaco, Shell/Sempra, Marathon and Australia-based BHP Billiton listed among the most likely candidates to survive.

While the first three are proposing to build their terminals offshore or onshore in Mexico, BHP is looking to build offshore California, 20 miles from Oxnard off Ventura County north of Los Angeles.