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Action Heats Up At Sempra LNG Projects at Cameron, North Baja

Sempra Energy announced Thursday it has signed a non-binding sale to Tractebel of up to one-third of the throughput capacity of its proposed 1.5 Bcf/d liquefied natural gas (LNG) terminal at Cameron, LA. It expects to have a definitive, 20-year contract by June 30. But it also has been fighting off perceptions of legal complications surrounding a second North American LNG project -- its Engeria Costa Azul proposed terminal in North Baja -- triggered by local opponents of the project.

In Louisiana, a unit of San Diego-based Sempra signed a "heads of agreement" (HOA) that eventually could provide Tractebel LNG North America LLC with up to 500 MMcf/d equivalent capacity at the Sempra facility to be developed near Lake Charles and open in 2008. Other supply and capacity agreements for the Cameron terminal are currently being negotiated, Sempra said.

In North Baja, about 60 miles south of the international border, in what a Sempra corporate spokesperson said is a "common occurrence" in Mexico, a Mexico City businessman has gone to court in Baja alleging that Sempra is using some of his property for the proposed site -- not the land it acquired earlier. Sempra's spokesperson for the LNG project said the allegations are "without merit and factually defective," noting the company is confident it will prevail.

The disputed Baja ownership surfaced in a San Diego Union-Tribune report Thursday that was based on earlier news reports out of Mexico City. The dispute originated in a lawsuit filed by an Ensenada lawyer in a Mexican state court last November. The Mexican lawyer has been opposing Sempra's LNG terminal plans for a long time with little success.

Meanwhile, under the proposed agreement for Cameron, Sempra LNG would sell Tractebel LNG between 325 MMcf/d and 500 MMcf/d of throughput capacity.

Sempra LNG President Darcel Hulse said the agreement brings together Tractebel's "considerable experience in importing LNG to the United States with Sempra's expertise in developing major natural infrastructure." Hulse said the joint effort should "bolster North American gas supplies" in the future.

Sempra's Cameron project is fully permitted and is scheduled to begin construction later this year. Earlier this month, Sempra LNG announced it had awarded the engineering, construction, and procurement contracts for Cameron LNG to a consortium comprised of Aker Kvaerner of Norway and Tokyo-based Ishikawajima-Harima Heavy Industries.

At the Costa Azul site in Mexico, an access road is being completed this month, along with other pre-construction site preparation work, and the construction is about to begin "pretty soon now," according to Sempra's San Diego-based corporate spokesperson. Sempra has a 500 MMcf/d contract with a unit of Royal Dutch Shell for throughput at the 1 Bcf/d Baja facility, and announced a contract late last year for 500 MMcf/d of LNG that it will bring from Indonesia. Engineering/construction contracts for the facility also are in place.

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