If coal-fired generation is going to be increasingly pushed out and intermittent renewable-based electricity pushed into the mix, more natural gas, including imports of liquefied natural gas (LNG), will be needed after 2010 in California and more widely in other western states, according to the U.S. president of Australian-based Woodside Natural Gas, whose parent is a major LNG developer/operator on Australia’s Northwest Shelf.

As a former executive director of both the California Energy Commission (CEC) and California Public Utilities Commission (CPUC), Steve Larson helped identify the need for LNG in the midst of the state’s energy crisis, and now he is convinced it is part of the solution to the state’s and the West’s long-term energy needs.

Larson thinks Woodside has the right combination of competitively priced long-term LNG supplies and a proposed terminal-lite approach to getting the imports into the Southern California Gas Co. transmission pipeline system. In addition, Woodside’s proposed OceanWay project will not have to go through the California Lands Commission, whose chairperson — the lieutenant governor — is already on record as thinking the state can satisfy its LNG import needs through Sempra Energy’s Costa Azul terminal that opens next year along the Pacific Coast of North Baja California, Mexico, about 60 miles from the California-Mexico border.

With long-term involvement in the state’s energy matters, including past proposals 30 years ago for importing LNG as a legislative staff member to the senior state senator overseeing energy, Larson brought a broad perspective into his initial role when he headed the CEC staff and served on the state’s natural gas committee. In the midst of the 2000-2001 crisis, he readily saw the need for more gas-on-gas competition in the state.

“Back then, it was possible to see that it was pretty easy to manipulate the gas market in California,” Larson told NGI during a wide-ranging interview Wednesday in his Santa Monica, CA, office. “That was very obvious to the committee, so we were quite interested in storage and in LNG. In my experience, it became clear to me that gas was going to become less available to California because there were better prices for marketers and shippers who could get it to other places.”

As the result, state policy makers began to rethink the question of whether LNG needed to be added to the mix. Larson was involved in listening to early LNG proposals that suddenly developed when he held positions at the governor’s office, CEC and ultimately the CPUC. His experience convinced him he should take on the CEO’s role for Woodside’s California operations.

If the state is willing to pay any price, California can get LNG imported, but to make it as economic as possible requires a lot more work, said Larson, noting that Sempra’s Costa Azul supplies will help somewhat electric generation needs in Southern California, but the bulk of the gas will be used for power generation in Mexico or go north to the Arizona-California border interconnection at Erhenberg, AZ.

“So in terms of growth in the region, something else [beside the North Baja terminal] is needed,” Larson said. “And our project is right offshore Los Angeles, it’s a good deal for us, and it’s a very, very good deal for the whole area.”

The Los Angeles Department of Water and Power (LADWP) does long-term deals to fulfill and hedge its natural gas needs, and as its coal-fired generation [out of state] is phased out, the city-run utility will have a need for new gas supply deals. Larson indicated the Woodside is talking with LADWP, Sempra utilities and Southern California Edison Co., as well as a lot of other prospective gas buyers.

“For me, I think there is definitely a reason to keep the facilities offshore, and that is why I think our technology can really make a difference. Such a viable and amazing economy as California’s needs energy. Our facilities [a submerged buoy where regasification ships will unload] being right off the coast makes us every bit as competitive [as an expansion of the Sempra LNG terminal].

“That is good for California and why I was interested in moving to this job [earlier in the year]. There should be competition; this is a deregulated market. You don’t want one company supplying all the gas in this state in the type of volatile situation we now face.”

He thinks federal officials are interested in seeing a site permitted by the end of next year, and Woodside likes that time frame, but the local hearing process, which is sure to bring continued opposition, is scheduled to begin Sept. 26 at a hotel near Los Angeles International Airport. near where the regasified LNG would come ashore from its 28-mile-long underwater pipeline in Santa Monica Bay. Larson conceded the local permitting by the City of Los Angeles may take longer than the U.S. Coast Guard year-long process, however.

“It should be real interesting to see what happens at the upcoming scoping meeting,” said Larson, adding that Woodside has worked all along with various environmental groups, listening to their concerns and trying to incorporate them into the OceanWay project plans. Having said that, he conceded that opposition from environmental groups is likely.

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