With the most far-reaching of a number of proposed liquefied natural gas (LNG) projects for North Baja, Mexico, Marathon Oil Co. announced last week that it expects to start construction this year on its $1.5 billion multi-faceted energy center near the border city of Tijuana. Marathon said its consortium had selected KBR (Kellogg Brown & Root) and Techint S. S. de C. V. as the engineering, procurement and construction contractors.

Marathon and its joint development partners still need approvals from Mexican federal authorities. The group has made the first application to Mexico’s federal energy regulators (CRE) and has gone through the public comment phase of the regulatory process, according to a Houston-based Marathon spokesperson. “We hope the approval will be sometime soon, but we can’t speculate on when that will occur. Our application was made a number of months ago, and we’re hopeful that permits will be granted some time in the near future.” The consortium also is working to line up LNG supplies, with Asia-Indonesia being among the leading sources.

The spokesperson noted that Indonesia’s national oil/gas company, Pertamina, earlier this month announced an expansion of its liquefaction facilities including two new production arms, each capable of processing 3 million metric tons of LNG annually. Marathon discussions with Pertamina are “ongoing.”

“Assuming regulatory approval and the development of a successful commercial structure (supply contracts) and financing plan, construction of the facilities is scheduled to begin in 2003 with start-up expected in 2006,” the spokesperson said.

A number of proposals have been made by major U.S. energy companies for siting LNG terminals along the Pacific Coast of North Baja, but the Marathon consortium proposal is the only one to also include a 1,200 MW gas-fired power plant and a 20 million-gallon/day water desalination plant, wastewater treatment facilities and natural gas pipeline infrastructure. It is proposed to take up about 16% of a 700-acre (240 hectares) site, and the company is banking on efficiencies from the integrated site, as well as political and environmental advantages in cleaning up an area that has been hurt by dumping and the polluting wastewater runoff into the ocean.

Marathon envisions a 1 Bcf/d LNG terminal at its peak, with less than 200 MMcf/d of those supplies being used in the on-site power plant, so it is counting on transporting large volumes around north Baja and into California via a combination of new and existing pipelines. San Diego-based Sempra Energy, which has a competing LNG terminal proposed for a 350-acre site just south of Tijuana, near Ensenada in Baja, has the recently completed North Baja natural gas pipeline from the California-Arizona border (see Daily GPI, Jan. 6).

KBR will initially provide engineering for the offloading terminal, regasification plant, desalination plant and natural gas pipeline infrastructure. This will be followed by detailed engineering, procurement, construction, commissioning and testing activities executed by a joint venture of KBR and Techint.

Marathon is the only company among the current Baja LNG competitors with extensive experience in the sector. In 1969, the company co-founded a joint venture to export LNG from Alaska to utility companies in Japan. Marathon said the Alaskan project represents the world’s longest-running LNG export business to Asia and North America’s first, and only, LNG export operation.

Eventually, the Alaskan LNG supplies could come south to Baja in an exchange deal that would send some of Marathon’s eventual Indonesian-based supplies to Japan. This would be much shorter shipping routes for the respective supplies.

Marathon’s partners in the project “Baja Regional Energy Center” are: Grupo GGS, S.A. de C.V., a Mexican-based company that has participated in various infrastructure and power generation projects; and Golar LNG Ltd., a Bermuda-based holding company that operates 10 LNG ships, six of which the company owns. Golar is scheduled to take delivery on four newly-built vessels this year and next, adding to its independent fleet.

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