Shell in forefront of Mexican LNG

Gary Park

Petroleum News Calgary correspondent

Shell has tightened its grip on the race to build Mexico’s first liquefied natural gas terminal by announcing a deal involving a regasification facility on the Gulf Coast.

The Altamira project, already permitted by Mexico’s Energy Regulatory Commission, covers two storage tanks with combined capacity of 500 million cubic feet per day.

Shell said the terminal is scheduled to come on stream in the second half at a cost of $370 million.

A contract has been signed with the Mexican commission for Shell to build, maintain and run the terminal for 15 years, serving power plants and other large industrial gas consumers.

The facility will “increase the certainty of gas supply in Mexico, providing a new source of natural gas for the country,” Shell said in a statement.

Currently, Mexico produces 4.59 billion cubic feet per day, but imports 765 million cubic feet per day from the United States.

Shell, Sempra Energy and Marathon Oil are also in the running to build LNG terminals in Baja California, while ChevronTexaco has applied for a permit there.

The Baja peninsula lacks electricity and gas interconnections with the rest of Mexico, but does have them with Southern California.

The LNG proponents say the planned terminals, costing a combined $1.8 billion, will be used mainly in the Mexican market, although Mexico’s Energy Ministry has estimated Baja will need only 658 million cubic feet per day by 2010 — far less than the projected 2.3 bcf capacity of the Shell and Sempra projects alone.

Shell and ChevronTexaco are partners with ExxonMobil in Western Australia’s Gorgon gas field and have tentative deals in place to make shipments to the Baja facilities.

The two companies have signed letters of intent covering 20-year contracts from Gorgon, which has proven reserves of almost 13 trillion cubic feet and expects to attract $7.2 billion in development spending from now to 2025.