Marathon Oil Corp. has dropped its plans to build a liquefied natural gas (LNG) terminal in Baja California after Mexican authorities took back the leases for the site the company was considering.

Marathon had received approval last May from the Comision Reguladora de Energia (CRE) for the Tijuana Regional Energy Center (see NGI, May 12, 2003). The complex import terminal was to be built by Marathon and its joint development partners Grupo GGS SA de CV and Golar LNG Ltd. through their operating company Gas Natural Baja California.

The energy center was to include an LNG offloading terminal and 750 MMcf/d regasification plant, a 1,200 MW power plant, a 20 million gallon seawater desalinization plant and a wastewater treatment facility.

With regulatory approval in hand, Marathon even had gone so far as to enter into a memorandum of understanding with BPMIGAS, the government regulator of Indonesian upstream oil and gas activities, to import 3-6 million tons/year of LNG for 20 years to the proposed facility (see NGI, July 28, 2003).

Marathon spokesman Paul Weeditz told Reuters last week that “Marathon and its partners are surprised and disgusted by the local government’s decision to expropriate the land which we had an option to purchase.” He said, “It is obviously a sign that the government will not support the project, and as such it is clear that the Tijuana energy center will not be built,” he told Reuters. Marathon apparently does not have an alternative site for the energy center.

When the Mexican government approved the permit last year, it was the first of its kind accepted. However, additional permits were required, including Mexican federal environmental authority. Marathon had expected to have the complex in service in 2006.

The Baja California state government said last week that the expropriation was carried out for “public use” to guarantee “urban development and ordered, integrated and sustainable growth for the city of Tijuana.” Mexican officials said housing shortages, land ownership, infrastructure problems and environmental conservation were among reasons for the action.

The decision did not create any concerns at San Diego-based Sempra Energy, according to a spokesperson for the company’s LNG operations. Sempra owns the land at its Costa Azul site, which it has a joint venture with Royal Dutch Shell subsidiaries to develop as an LNG receiving site.

“Our project is properly zoned, and we have a letter of support from the local government regarding the land use,” said Georgina Garcia, a spokesperson for Sempra’s Global Enterprises business unit, who noted that the Energia Costa Azul site complies with all of the local land-use requirements from the city of Ensenada. (Marathon’s problems arose with a different local government tied to the border city of Tijuana.)

“We don’t expect to encounter any of those problems,” said a Shell LNG project spokesperson in Mexico.

Sempra hopes to lock up LNG supplies through BP and the Indonesian government and have construction at its joint-venture site underway by the end of this year or early next, with the first shipments of LNG to arrive in 2007.

©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.