It’s still in early stages, but Sempra Energy's Octavio Simoes, who is president of the liquefied natural gas (LNG) business, said Tuesday a potential Pacific Coast export facility at the Energia Costa Azul facility in North Baja, Mexico could be operational as soon as 2021.
Mexico is ramping up natural gas exploration and production (E&P), and a corresponding gas pipeline network would span from east to west south of the border, Simoes, who is president of Sempra LNG, told NGI on Tuesday.
Units of Sempra and Mexico’s Petroleos Mexicanos (Pemex) last Thursday inked an agreement to pursue development of LNG liquefaction capability at the Baja site (see Daily GPI, Feb. 19).
Sempra likely would bring in other partner-customers as it did in its Cameron, LA, LNG export project now under construction (see Daily GPI, April 18, 2012). Simoes sees the potential for future gas supplies being developed in Mexico and for a scenario similar to U.S.-Canada relations in which gas flows both ways across the international border.
Energia Costa Azul was designed as an import facility. Having Pemex as a potential gas supplier would strengthen Sempra’s hand.
"One of the benefits is that Mexico's Petroleos Mexicanos is one of the potential gas suppliers, and it can arrange for the gas supplies,” said Simoes. “That is a role it would like to have. So that is something we will contemplate, and Pemex could eventually be the gas supplier for the project."
Late Tuesday, Sempra submitted a pre-filing review with the Federal Energy Regulatory Commission to expand the Cameron export facility in Louisiana to five trains from an existing three. Overall, the facility could grow in capacity to 24.92 metric tons/year, or the equivalent of 3.53 Bcf/d. Sempra also this week filed with the U.S. Department of Energy to export the added volumes to nations without U.S. free trade agreements.
However, Simoes was reluctant to speculate about the prospect of U.S. gas supplies being involved in the Mexico LNG project.
"I really don't know at this point,” he said. “It is a possibility, but now we are looking at all the alternatives as to where the gas will come from.”
Simoes said the antecedents for the new export agreement go back to the opening of Costa Azul as a LNG import facility in 2008. Sempra LNG, Sempra’s Mexican-based IEnova and Pemex signed a memorandum of understanding (MOU) to explore a liquefaction project. Now the parties are working on a project development agreement, which Simoes said could be worked out by the end of this year.
He said it is not clear if the Mexican project would use the tolling facility model that Cameron has in which Sempra processes the gas but is not a buyer or seller. The other common models are a hybrid in which facility developers also own the gas, or the integrated approach where the developers own the gas and market it.
"We don't know what Costa Azul is going to look like; it depends on who comes to the table with what interests," Simoes said. A unit of Royal Dutch Shell plc "is an existing customer at Costa Azul” and there “is a possibility in having an interest [in the export facility] and wanting to participate, but at this point there is nothing concrete so I won't say anything.
"The MOU doesn't say that Pemex and Sempra are going to jointly build this project, and that's it. It says we are going to collaborate on the development, [it] lays out some roles and responsibilities, and that is where we are going to go. It’s not just the two of us; we will have other partners that will join us in the development of Costa Azul,” he said. “The MOU is just the beginning of it.”
Simoes noted that Sempra had been working on developing liquefaction at Costa Azul for at least a couple of years, and when the import terminal opened in 2008 Mexico’s president at the time, Filipe Calderon, said he hoped it would be a future location to export gas supplies. “We have been working with the different agencies in Mexico as there has been development of shale, continued E&P for gas, energy reform that will boost the production of gas and the imports from the United States,” Simoes said. “all of that created the condition that liquefaction may make sense for exports out of Mexico.”
Gas liquefaction was specifically called out in Mexico’s energy reform plans. “Pemex became very interested since it plays a role in global oil supplies and it also wants to play a role in global gas supplies,” he said.
As an import facility, Costa Azul continues to receive deliveries from the Tangguh facility in Indonesia (see Daily GPI, Oct. 13, 2004). Sempra also is maintaining its obligation to supply a certain amount of gas for electric generation in Baja and in California, said Simoes.