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Baja Pipeline Draws Strong Market Interest; Filing Pending

Baja Pipeline Draws Strong Market Interest; Filing Pending

Strong interest amounting to essentially double the proposed capacity from a recently completed open season has units of PG&E Corp. and Sempra Energy pushing for a FERC filing by the end of this month for their joint venture natural gas pipeline lateral from the Arizona-California border through northern Baja in Mexico, PG&E's CEO told financial analysts Tuesday.

PG&E and Sempra jointly have proposed building a $230 million, 212-mile 30-inch-diameter transmission pipeline as a lateral off existing east-to-west southwest interstate pipelines, including a 77-mile leg of the proposed line that would cut through the southeast corner of California before going into Mexico. The proposed pipeline initially has been slated to carry up to 400 MMcf/d.

The two U. S. pipeline proponents are considering increasing the line's proposed capacity in the upcoming FERC filing based on the level of interest expressed, but the added volumes would be quite a bit less than doubling the capacity, said a PG&E spokesperson last week.

"We are moving forward nicely with a successful open season for which we got expressions of interest more than double the capacity of the pipeline, and we're in the process of converting these into firm commitments and expect to file at FERC by the end of this month," said Robert Glynn, PG&E's CEO, in announcing improved third-quarter earnings results, but acknowledging that the company "certainly has challenges ahead of it in the California market."

In announcing the joint venture in June, the partners said the pipeline is targeted on new and existing gas-fired electric generating plants and other energy-intensive industries in northern Baja and in the southern end of California. As expected, a lot of the initial interest comes from these sectors, along with a developing local distribution company in the border town of Mexicali, Mexico, the PG&E spokesperson said.

To date, there is no active competitors to this proposal. Several years ago, El Paso Natural Gas had a proposed pipeline into the area, but it has been dormant. The Sempra-PG&E proposed pipeline would interconnect with one of El Paso's pipelines serving California.

"As far as we know, we're the only really active project for bringing new gas supplies into northern Mexico and the southern end of California," the PG&E spokesperson said.

The deal includes participation by the Mexican firm, Proxima Gas SA de CV, and it is a 50-50 partnership by the two U.S companies for their portion of the pipeline. PG&E's National Energy Group will develop the 77-mile U.S. segment of the proposed pipeline, while Sempra Energy International and Proxima Gas will build the 135-mile portion in Mexico in a geographical region in which Sempra is already active in developing gas distribution and transmission systems for several growing Mexican cities along the border.

Richard Nemec, Los Angeles

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