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Sempra Energy taps Indonesia LNG for U.S. Company to buy gas from BP Indonesia development for Baja LNG terminal Larry Persily Petroleum News Juneau Correspondent
Sempra Energy says it intends to buy 500 million cubic feet of liquefied natural gas a day from an Indonesia project starting in 2007 to supply the Mexican Baja LNG terminal it will build in a joint venture with Shell International Gas Ltd., part of the Royal Dutch/Shell Group of Companies.
British Petroleum, the largest owner of Indonesia’s Tangguh project, announced the deal Dec. 18 at an international LNG conference in Washington, D.C.
Under the agreement, BP’s commitment to supply Tangguh LNG will run for 15 years, with an additional five years of supply from other Indonesian LNG sources.
The terminal, at Costa Azul on the Baja Peninsula’s West Coast, will be less than 35 miles south of the U.S border. Sempra and Shell said the gas will be used to meet local needs in Mexico and to pipe across the border to serve Southern California and Southwest U.S. markets.
Tangguh is about 8,000 miles from the proposed terminal. Lawsuits threaten project The Baja terminal is not without problems, however. A federal court in Mexico has temporarily suspended two of Sempra’s key permits for the project until the court can fully study opponents’ claims that the project would hurt tourism and the environment.
“We are not concerned with people exercising their legal rights,” Sempra Energy LNG Corp. President Darcel Hulse told the San Diego Union-Tribune. “It won’t affect our timetable because this matter will be resolved.”
The proposed receiving terminal site is about a mile from a golf resort, whose owner filed the suit against the permits. Several other suits also are pending against the project.
Sempra and Shell will split the joint venture project 50-50, with construction scheduled to begin in mid-2004. The terminal’s cost is estimated at $600 million, according to a joint press release. Shell’s partner is Sempra Energy LNG Corp., the newest subsidiary of San Diego-based Sempra Energy.
The terminal’s send-out capacity will be 1 billion cubic feet per day, with no firm announcement from Shell as to where it will get the gas for its half of the capacity. Shell is developing LNG export projects at Russia’s Sakhalin Island and also at Australia’s North West Shelf.
“The proposed joint venture will combine the two separate Baja LNG receiving terminals proposed by Shell and Sempra into a single project,” the companies said in a joint news release Dec. 22. Alaska, Bolivia left behind Although Sempra officials said early this fall that Alaska had an exceedingly outside chance at the LNG supply deal, the state agency in charge of building a state-owned LNG project never released any written offers from Sempra and company officials have declined further public comment in recent months.
The Alaska Gas Development Authority is looking for buyers for North Slope gas, in addition to needing the North Slope producers to sell gas to the newly created authority and also needing financing to build its proposed multibillion-dollar project at 2 billion cubic feet per day. Even if the authority could have put all of those pieces together, it could not have met Sempra’s 2007 start date to supply the Baja terminal.
Meanwhile, the North Slope gas owners remain doubtful that an Alaska LNG project can ever be competitive in a world market flooded with multiple sellers looking for buyers.
“An Alaska LNG project for North Slope gas doesn’t compete with worldwide LNG supplies because it requires an 800-mile pipeline to reach tidewater,” said Dave MacDowell of BP in Anchorage.
“The recently announced Tangguh project is smaller, is at tidewater, and is competitive with worldwide LNG supplies,” he said.
Also hoping to land the Sempra contract was Bolivia, which had been working to find a buyer for its land-locked natural gas. But the project is two years overdue, embroiled in political controversy over whether to ship the gas from a port in Chile or Peru.
“We’ve taken too much time and lost a market,” said Jose Galindo, chief of staff to Bolivia’s president. “We regret that this strategic topic was politicized to the extreme of making it unworkable,” he told Dow Jones Newswires on Dec. 21. “We’ll have to get in line and wait many years.”
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