Yukon Eyes Mexico as Potential LNG Market

Yukon Pacific Corp. has come up with a "slightly new twist to supplement" its long-standing project to supply Asian markets with Alaskan liquefied natural gas (LNG), and in fact company executives were in Mexico yesterday to sound out officials there about it.

In addition to shipping LNG to Japan, Korea and Taiwan, Yukon Pacific is seriously eyeing the feasibility of transporting liquid gas by tanker to western Mexico to serve growing markets there, as well as piping gas from Mexico to the California market, said company CEO Jeff Lowenfels. "We think there's a potential for up to about 500 tons of LNG per year [in Mexico]. That's a hefty slug of LNG," he told Daily GPI.

Lowenfels said Yukon Pacific met with the Mexico governmental officials, a mayor and potential LNG users about its plans to potentially ship to the West Coast, and received a "very positive" reaction.

"We are looking at Mexico as a supplemental market to the Asian LNG market.....We've already located a spot [in Mexico] where you could put it into a pipeline, reverse the flow and bring it up into California."

He thinks Yukon Pacific's gas-to-liquids project makes more sense than the proposals for new overland pipelines from Alaska to the Lower 48 states. Many people, especially the politicians in Alaska, think natural gas prices will remain high enough to sustain an overland pipeline. "We do not buy into that. We are quite certain that the price of gas in the Lower 48 states while it will be high this winter, will go back to more normal levels between $2-$2.50" within the next 16 to 18 months, Lowenfels said.

Moreover, he noted Yukon Pacific's project, which has been in the works for 16 to 17 years, has a headstart on the pipeline projects because it already has its permits, presidential and Department of Energy approvals, and most of the environmental work is completed.

The company's project would entail construction of the 800-mile, 36-inch Trans Alaska Gas System (TAGS), which would ship gas from Prudhoe Bay to Valdez, AK, where it would be liquefied and placed on tankers for Asian markets and possibly Mexico. The project also would require the construction of an LNG receiving facility in western Mexico. Lowenfels estimates it would cost about $8.1 billion for the first phase of the project, which would produce about 9.2 million metric tons of LNG.

Right now, Yukon Pacific, a business unit of CSX Corp. of Richmond, VA, is the sole sponsor of the project, but Lowenfels said he "anticipates" others joining.

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