The first and most complex of four proposed liquefied natural gas (LNG) import terminals in Baja California was approved Thursday by Mexico’s Comision Reguladora de Energia (CRE). Marathon Oil Corp. and its joint development partners, Grupo GGS S.A. de C.V. and Golar LNG Limited, announced that their operating company, Gas Natural Baja California, received a storage permit for the Tijuana Regional Energy Center.

The massive complex, which would be located near Tijuana, Baja California, would 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.

Marathon’s permit submission is the first of its kind accepted and approved by the Mexican government. However, additional permits are required for the facilities, including Mexican federal environmental approval, but Marathon expects to be able to start construction this year and have the complex in service in 2006.

“The type of project we are proposing here is not only unique to Marathon, I think it’s unique around the globe in terms of all of these different elements being integrated into one complex,” said Marathon spokesman Paul Weeditz. “It’s part of Marathon’s strategy to build an integrated gas business in addition to the existing E&P business that we already have and our best-in-class downstream operations through our joint venture with Ashland in the United States. It’s the third leg of the stool that we announced last year.”

The energy center will be a state of the art complex designed to meet the region’s massive population growth and stimulate economic development in the coming years. It will provide clean energy and water, while also improving local infrastructure capacities that will help protect the environment and enhance the overall quality of life in the region, Marathon said.

Announced in 2002, the proposed energy center would be an integrated complex that will consist of an LNG terminal and regasification plant, a power generation plant to supply regional electricity needs, a 20 million gallon per day seawater desalination plant to provide fresh water for the city of Tijuana, wastewater treatment facilities to augment existing processing capacity of the San Antonio de los Buenos treatment plant, and related natural gas pipeline infrastructure.

Weeditz said about 600 MMcf/d of gas will be left over to sell on the wholesale market after fueling the power plant and other facilities. “That will be used locally and some will be available for export.” He said the company currently is looking at its gas transportation options. “It’s hard to predict exactly how much will be exported at the moment. Tijuana’s population, for example is expected to double by 2020. It will be equal to [the population] of the entire San Diego County.”

Regarding LNG supply, he said the company may use some of its existing LNG output from its export facility in Alaska if it can work out a swap arrangement with the export facility’s existing customers in the Asia-Pacific region. “We’re in discussions with a number of potential suppliers in the Pacific Basin and South America. There are a lot or permutations on how this might evolve. There potentially could be some sort of exchange agreement that involves taking gas from the Asia-Pacific area to Japan and taking Alaskan LNG down to Baja. If you look at the travel route, it’s much shorter from Alaska.”

Marathon wouldn’t comment on the other three proposed LNG facilities for Baja California. In addition to Marathon, Sempra, El Paso and ChevronTexaco have announced projects. All are in various stages of development planning. El Paso apparently has put its plans on hold while it gets its financial house in order. The other two competitors have now fallen behind but with the market booming, there’s little doubt among experts that more LNG will be needed.

In 1969, Marathon co-founded a joint venture to export LNG from Alaska to utility companies in Japan. This joint venture represents the world’s longest-running LNG export business to Asia and North America’s first, and only, LNG export operation.

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