Marathon subsidiary signs for LNG for Tijuana facility

Marathon Oil said July 24 that subsidiary Marathon GNBC Ventas and partners in the Tijuana Regional Energy Center have signed a memorandum of understanding for long-term supply of liquefied natural gas from Indonesia.

Under the agreement, the Indonesian government's regulator of Indonesian upstream oil and gas activities, Bpmigas, would coordinate negotiation of LNG supply agreements to supply the center with 3 to 6 million metric tonnes of LNG per year for 20 years.

Joint development partners in the Tijuana center include GNBC Ventas, Grupo GGS and Golar LNG Ltd.

Marathon said the LNG would be shipped to the Tijuana Regional Energy Center being developed by Marathon and its project partners near Tijuana, Baja California, Mexico. The memorandum of understanding "could lead to the execution of one or more definitive LNG purchase and sale agreements," the company said.

LNG supply sources could include the existing liquefaction plant at Bontang, East Kalimantan, or planned liquefaction projects in Irian Jaya or Sulawesi and would be subject to the ongoing negotiations with production sharing contract holders, with support and approval of Bpmigas, Marathon said.

John S. Hattenberger, senior vice president of Marathon International Petroleum Ltd., said: "Indonesia has the potential to be a significant supplier of LNG to the Tijuana Regional Energy Center and we look forward to finalizing the necessary agreements that will serve as the basis for a long-term, mutually beneficial relationship."

The proposed Tijuana center, announced last year, will be an integrated complex with an LNG offloading terminal, a 750 million cubic feet per day re-gasification center, a 1,200 megawatt power general plant which will supply regional electricity needs, a 20 million gallon per day seawater desalination plant to provide fresh water for the city of Tijuana, wastewater treatment facilities to augment existing processing capacity at the San Antonio de Los Buenos treatment plant and related natural gas pipeline infrastructure.

Marathon said GNBC and its affiliates are proceeding with necessary regulatory review and permits. Subject to regulatory approvals and successful commercial and financing plans, the company said, construction of the center would begin in early 2004 with start up expected in late 2006 or early 2007.