CMS Plans LNG Facilities in Mexico, Gulf

CMS Energy CEO William McCormick said last Wednesday his company, which already operates the largest LNG terminal on the continent, plans to build two terminals in Mexico and another offshore in the Gulf of Mexico. As new gas-fired electric generating plants continue to pop up all over the country, gas demand is expected to increase by 3.5% to 4%, or nine-tenths of a Tcf annually, according to McCormick. This demand growth will produce the economics necessary to increase LNG importation into the country.

The reason for the growth in gas demand is "all of the traditional uses of natural gas are still growing, but then you layer on top of that all of the new electric generation that is coming online," McCormick noted at a press conference in Washington, D.C. "Right now we are using about 23 Tcf, and if you do the math, 4% comes out to be about eight-tenths to nine-tenths of a Tcf [a year].

"That is one of the reasons that we are fairly bullish on the need for new gas supplies and why the prices will probably stay up in this $4.00 area until we see new supplies, but also provide the economics that will allow significant additional importation of liquefied natural gas," he said.

McCormick said CMS is currently exploring the possibility of building a 1 Bcf/d LNG facility offshore in the Gulf of Mexico to tie in with the company's two major offshore pipelines. The executive also said that his company has been in talks with the government of Mexico for two proposed 1 Bcf/d LNG terminals, one on the West Coast and one on the East Coast of that country. One would be located in Baja California, Mexico, while the other would be constructed east of Mexico City. McCormick said both Mexican projects have an in-service date of 2005, with scheduled expansions to 2 Bcf/d already in the works.

"The government of Mexico is interested in importing LNG into Mexico, both for direct use as well as electric generation," McCormick said. "If we were to build some of these facilities, we could also size them large enough to allow gas to be brought north to the border and into the U.S. pipeline system."

McCormick said he believes the Mexican government and Mexico's national petroleum company (Pemex) want to take the fast track on the planning of the LNG facilities. He expects there will be some decisions made on the facilities later this summer.

CMS Trunkline LNG, which recently expanded the peak send-out capacity of its terminal in Lake Charles, LA, from 700 MMcf/d to 1 Bcf/d (see NGI, April 9), expects to receive at least 60 cargoes (150 Bcf) this year, five more cargoes than in 2000 and 33 more than 1999. Through a recent contract with United Kingdom-based BG Group, all of the previously uncommitted capacity at the Lake Charles terminal is now firmly committed for the next 22 years (see NGI, May 21). McCormick noted that the company is evaluating further expansion to increase send-out capacity to 1.5 Bcf/d.

"There is a lot of stranded gas in the world, and the economics of LNG are such that you could make it work very economically at prices at or below three dollars," McCormick said. "The bottom line is with the economics of natural gas what they are in North America, I think it is virtually certain that LNG will play a larger role in our gas supply for the United States and possibly Mexico as well."

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