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Tidelands Seeks Permits for Mexico's First Storage Field

Tidelands Oil & Gas Corp. said its subsidiary, Terranova Energia, filed a permit application Aug. 5 with Mexico's Comision Reguladora De Energia (CRE) for construction of a proposed 50 Bcf underground natural gas storage facility in the Brasil Field of the Burgos Basin near Reynosa, Tamaulipas. The facility will be Mexico's first gas storage field and is expected to be part of Tidelands' integrated cross-border gas pipeline, storage and LNG import project.

"The permitting process represents a significant milestone in Tidelands' continuing efforts to establish itself as a prominent contributor to Mexico's oil and gas infrastructure," said Tidelands CEO Michael Ward. "We are confident that our preparatory efforts and meticulous scrutiny regarding the details of our projects will expedite the permitting process, and as always, remain focused on growing our company and building shareholder value."

In an interview with NGI, Ward said Tidelands' next steps will be to file for permits for its proposed offshore LNG regasification terminal and associated pipeline and for another pipeline extending from near its proposed storage hub to industrial customers in Monterrey.

"As soon as we get all of our permits, we will start construction. We're going to build the whole enchilada all at one time," said Ward. "It's a sparsely populated area," so construction should move rapidly.

However, Ward noted that the regulatory process for storage fields is untried. "This is the first storage field that's every been done down there so [a permit for] that could take a while," he admitted. "They don't have to develop regulations, but there are some constitutional issues that clearly will be a [significant regulatory] step. I'm not really uncertain about it. I'm pretty confident."

The storage field will be a porous sandstone reservoir bounded by impermeable rock layers. Ward said the field will be able to hold 50 Bcf of working gas and will have about 500 MMcf/d of peak deliverability. The storage facility will help satisfy gas demand in northeastern Mexico, including industrial demand in Monterrey.

Storage will play a key role in Tidelands' broader project. Tidelands hopes to begin construction next summer with the entire project, including pipelines, storage and LNG terminal, operational in early 2008.

To speed the process along, the company signed a consulting services agreement last week with CenterPoint Energy Pipeline Services, which will provide expertise in the design and development the ambitious gas infrastructure project. Tidelands also entered into a letter of intent with the CenterPoint Energy subsidiary to provide oversight for the construction, operation and maintenance of the integrated pipeline, storage and LNG project, pending a definitive agreement between the two companies.

Tidelands said that it brought CenterPoint Energy on board because of its experience operating two affiliate natural gas pipelines: CenterPoint Energy Gas Transmission and CenterPoint Energy-Mississippi River Transmission. The two pipeline systems extend 8,200 miles and include six underground natural gas storage facilities and more than 350,000 horsepower of compression in six states.

"CenterPoint Energy's sustained reputation for dependability has prompted us to engage their consulting services to investigate and evaluate the intricate details of our proposed pipeline, storage facility and LNG Project," Ward said in a statement.

Tidelands already has received authorization from the Texas Railroad Commission for its two 500 MMcf/d border crossing pipelines (see NGI, April 25). It now is awaiting approval from the Federal Energy Regulatory Commission (see NGI, May 30). The pipelines include the proposed Progresso International Pipeline system, which will run from the Rio Grande to Donna Station with potential interconnects with Texas Eastern Gas Transmission, Tennessee Gas Pipeline and Texas Gas Transmission. It will extend 17 miles into Mexico and 10 miles into the U.S. The other system, Mission International Pipeline, will run from the Rio Grande to the Valero Gilmore Plant with potential interconnects with Houston Pipe Line, Calpine, Kinder Morgan Texas, El Paso and Gulf Terra. The line will extend 52 miles into Mexico and 25 miles into the U.S.

A Tidelands subsidiary filed an application in March with the CRE in Mexico for a permit to build a 1 Bcf/d Terranova Oriente pipeline system, a 160-mile bidirectional pipeline that will form the backbone of the Tidelands project in Mexico and will connect to the two border crossing systems (see NGI, April 4, March 28).

Initially, gas flows into the border crossing pipelines will be in a southerly direction into Mexico. But later, it is anticipated that gas flows will be reversed after Tideland's proposed Dorado HiLoad LNG import facility is connected to the new storage field.

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