El Paso Corp. and DKRW Energy LLC jointly agreed Thursday to develop up to 350 miles of natural gas pipeline infrastructure within Sonora, Mexico by 2008. The pipelines, to be built by subsidiaries El Paso Blue Atlantic US Inc. and Sonora Pacific Mexico, will transport gas provided by DKRW’s planned Sonora Pacific LNG, a 1.3 Bcf/d liquefied natural gas facility proposed for Puerto Libertad on the Gulf of California.

DKRW signed an agreement with the Sonoran government to build the regasification terminal and associated gas pipeline facilities in May, and it secured the land for the facility in August (see Daily GPI, Aug. 18).

A total of 500 MMcf/d is expected to be consumed in Sonora, primarily in the power generation sector, while 800 MMcf/d will be shipped to the United States. Once in operation, the project will convert 1,200 MW of an existing residual fuel oil-burning power station in Sonora to natural gas.

Initially, the pipeline will distribute natural gas to Naco, Hermosillo, Guaymas, Ciudad Obregon and Navojoa. An export line through Nogales, AZ would interconnect with the El Paso Natural Gas (EPNG) interstate pipeline system at the Mexico/U.S. border. The gas would then be transported into the EPNG mainlines for further distribution in the western U.S. markets.

Stephen C. Beasley, president of El Paso’s Eastern Pipeline Group, called the agreement a “significant North American pipeline construction project, serving important growing markets in the state of Sonora as well as the western United States.”

DKRW’s equity interest in the new Mexican pipeline system will be available to gas suppliers and other investors as the project proceeds. Within the next several months, DKRW plans to market throughput capacity and equity in the terminal and secure all necessary federal state and municipal permits.

“The permitting process is moving very smoothly due to our cooperation agreement with the state of Sonora and the veteran team of professionals we have working to secure the appropriate permits at the federal, state, and municipal levels,” said Tom White, DKRW’s managing partner for the project.

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