Last week began with a couple of energy industry heavyweights announcing preliminary deals for liquefied natural gas (LNG) supplies to be brought to proposed terminals along the North Baja Pacific coast in Mexico and ended with Sempra Energy’s CEO promising to build the first LNG terminal there.

Up the coast, giant Japanese conglomerate Mitsubishi confirmed that it is moving ahead with plans for developing an LNG terminal in Long Beach Harbor to process its gas supplies already under contract in Indonesia and elsewhere. The supplies would be shipped in the company’s growing fleet of ocean-going tankers. Backers predict the Japanese firm could have the first LNG terminal on the West Coast, but history goes against that prediction.

When California repealed a 1977 law designed to streamline the LNG terminal siting approval process in the late 1980s, LNG became a dormant concept. However, times have changed. In a report released last month by the California Energy Commission, “LNG in California: History, Risk and Siting,” as many as a dozen possible permitting steps are listed for a potential terminal located on or offshore California.

“The actual federal, state and local agencies involved in a specific project depend upon the project’s location (land-based on military reservation, other land-based, offshore but within three miles of the shore, and offshore between three and 12 miles of the shore), and the interconnection to the natural gas pipeline network (interstate or intrastate),” the report concluded.

Another California firm, San Jose-based Calpine Corp., said last week it is in negotiations — presumably with any or all of the sponsors of proposed terminals in California and Baja — to lock up future LNG supplies, which CEO/Founder Peter Cartwright said eventually will make up one-quarter of the company’s natural gas supply portfolio. Cartwright said that portfolio should grow from its current 2.5 Bcf/d volumes to 3.7 Bcf/d to supply the company’s growing fleet of mostly new natural gas-fired power plants that will total more than 30,000 MW by the end of next year.

Offshore western Australia, supplies are being targeted for West Coast terminals proposed by ChevronTexaco and Royal Dutch Shell, which collectively control the majority (6/7th) of the Gorgon field in which ChevronTexaco is the operator.

ChevronTexaco last Monday announced an affiliate had signed a memorandum of understanding (MOU) with Gorgon Joint Venture in Australia for up to 2 million tons annually of LNG supplies to West Coast markets. Based on the terms of the MOU, the ChevronTexaco affiliate will enter confidential negotiations with Gorgon Joint Venture, in which ChevronTexaco holds the majority interest and is the operator. The deal with Gorgon, which is tied to one of western Australia’s major offshore gas fields, could cover a 20-year period, beginning in 2008, the company said.

Mirroring the ChevronTexaco deal, the following day Shell Gas & Power announced it had exchanged “letters of understanding” with the Gorgon Joint Venture for a supply of LNG to be processed at Shell’s proposed terminal along the North Baja Pacific coast. Shell’s proposed terminal is at Costa Azul, north of Ensenada in the same area that Sempra Energy is proposing a receiving site.

As part of a second quarter earnings conference call with financial analysts, Sempra Energy officials said last Thursday they consider their company “ahead of the competition” to be the next major developer/operator of LNG terminals in North America.

Permitting approvals and long-term contracts will all be wrapped up by the end of this year, according to Sempra senior officials.”We have been building an LNG business for the last three years,” Sempra’s CEO Steve Baum said Thursday during a conference call. “We are ahead of the competition to bring on the next two receiving terminals in North America.”

Baum said that Sempra’s Cameron (LA) LNG project will have “the necessary Federal Energy Regulatory Commission approvals” by the end of this year, and the project will be “fully constructed” by 2006. Two key permits for its Costa Azul site will be forthcoming from Mexican federal and local regulators during the third quarter. Combined, the two LNG sites will give Sempra total regasification capacity of 2.5 Bcf/d, which would make Sempra “the owner of the largest LNG import capacity in North America,” Baum said.

During questioning, Baum said that the delay in getting Mexican federal approvals from the Comision Reguladora de Energia (CRE) has not had anything to do with Sempra’s proposal or its application, but instead has been tied to two local lawsuits filed in Mexico against the federal regulatory commission. One of those suits has now been dismissed, and Baum said he expected that the other one will be resolved shortly. Sempra is “actively marketing” the capacity of its two proposed facilities and hopes to announce some long-term contracts later this year, Baum said.

Ultimately, company officials conceded Sempra could be a candidate to join one or more of the other LNG terminal proponents in a consortium approach to building and operating a terminal. A Mexican federal energy regulatory commission official speaking at a regional energy conference last month predicted all of the terminal proposals will be permitted, but he did not expect all of them to be built. One, and perhaps two, will be built, the official said.

Sempra also has a strong tie to the Mitsubishi proposed terminal in California because its utility, Southern California Gas Co., would be a principal buyer for large quantities of the gas and its in-state transmission/distribution pipeline system would be the prime means of delivering the supplies.

“We have a number of discussions under way, ranging from simply marketing capacity to taking the commodity at a discount to index,” Baum said. “We’re in peculiarly favorable position because through out trading energy company we can offer alternatives for marketing to suppliers that may not have that ability to sell — although some of the large oil companies (ChevronTexaco and Shell) of course can do that — but for other producers who lack that capability, we offer that service.”

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