A new era of natural gas playing a significant role in Mexico’swestern Baja Peninsula was launched last week with the completionof Sempra Energy’s 10-year deal worth close to $1 billion to supplyup to 300 MMcf/d to fuel new and converted Mexican power plants atRosarito Beach in Baja, beginning in December 1999.

Sempra’s gas supplies will fuel one of Mexico’s new 450 MWelectric generation plants, along with two existing oil-fired unitstotaling 680 MW that will be converted. Eventually a totalgenerating load of 1,500 MW could be served in the coastal area 23miles south of the U.S. border. The project will require Sempra tofinance a 30-inch diameter transmission pipeline from the U.S.border to service the power plant in partnership with a Mexicancompany, Proxima Gas, which will build and operate the pipeline.

“The key to this deal is our ability to put together anintegrated package with one price for delivery of the gas to thepower plant’s door,” said a San Diego-based Sempra spokesperson.”The pipeline is an added plus since Baja is isolated from mainlandMexico energy grids and has historically had no gasinfrastructure.” Sempra has long coveted this project because itcarries the potential for supplying other plants and the growingindustrial load along the U.S.-Mexico border and the general bordercities of Tijuana and Mexicali, among others. It expects to be anaggressive bidder for the development of new gas distributionsystems in the nearby border cities of Tijuana, Tecate andEnsenada, which Mexico’s national energy commission has indicatedit will hold bidding on in the near future.

There was no competition for Sempra to supply the power plants;other U.S. firms that had expressed earlier interest dropped out,according to the Sempra spokesperson, noting that Sempra still hadto satisfy the Mexican government’s requirements to win the bid.

“We are pleased to deliver this kind of integrated energysolution to help (Mexico) meet its rising energy needs of BajaCalifornia’s businesses and residents,” said Stephen L. Baum,Sempra’s vice chairman, president and COO, noting that the projectis a “first” for the newly merged energy services company that wascreated in July by the merging of the parent companies of San DiegoGas and Electric Co. and Southern California Gas Co.

Two of its unregulated utility affiliated companies, SempraEnergy International and Sempra Energy Trading, are involved in theBaja project. Sempra has no interest in competing to develop thenew power generation plants in Baja, but it does-through itsSDG&ampE utility operations-transport bulk power in periods of peakdemand south of the border. Through other Baja projects begunearlier, Sempra is serving about 2,000 residential gas customers inChihuahua and 33 industrial gas customers in Mexicali, while itcontinues to develop new distribution pipeline systems in bothcities. Some residential customers in Mexicali are now beingserved, too, according to a spokesperson.

Expectations among Sempra’s leaders are that Baja’s recentbooming energy growth will continue to feed the growingindustrialization by international firms along theCalifornia-Mexico border, although most of these projections don’tfactor in the current international economic downturn spurred bythe Asian and Russian financial crises.

Sempra International develops, operates and invests in energyinfrastructure projects, including natural gas distribution systemsand power generation facilities, outside the U.S. It currently hasgas distribution partnerships in Argentina and Uruguay, in additionto Mexico.

Richard Nemec, Los Angeles

©Copyright 1998 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.