The latest announcements for developing liquefied natural gas (LNG) receiving facilities and related infrastructure in the northern end of Mexico’s Baja California peninsula already has energy planners in the Southwest scratching their heads over where and how the 2.2 Bcf/d already planned — and more in the works — will be transported and consumed. Conventional wisdom says 1 Bcf/d of added capacity — about one and a half projects — centered south of the U.S. border would likely be the maximum volume the market and pipeline infrastructure can handle, according to the California Energy Commission’s leading natural gas planning guru.

The Baja volumes in the three announced projects don’t necessarily consider the possibility (although remote) that other LNG receiving facilities might be sited along the U.S. portion of the Pacific Coast, including California. “I was talking to some people Monday who are interested in siting a LNG plant in California,” said Bill Wood, the natural gas planning director for the state’s energy commission. (In the past Shell and ChevronTexaco have talked about potential LNG receiving terminal projects, but without specific locations.) The Commission recently completed an outlook on California’s natural gas pipeline and storage infrastructure that Wood thinks may be out of date before this spring is over.

At maximum, two LNG terminals in Baja California might be “logistically do-able,” Wood said, “but that is a lot of gas that would have to be absorbed principally in California, Arizona and northern Mexico.” The current state energy commission gas planning model doesn’t factor in any LNG before 2007. Projects currently on the books talk about starting operations in 2005.

Pipeline takeaway capacity from North Baja, at least in the next few years, “may be one of the limiting factors,” said Wood, who noted that the initial volumes on Sempra Energy-PG&E’s North Baja pipeline are around 500 MMcf/d, and with added looping and compression that might be doubled to 1 Bcf/d. The existing Sempra gas transmission pipeline down to the Rosarito power plants about 40 miles south of the U.S. border is full and would have to be enhanced to take more supplies from new LNG sources, he said.

In addition, the recent cancellation of plans for the so-called Sonora Pipeline, involving Kinder Morgan and Calpine Corp., has state energy planners like Wood worried about adequacy of takeaway capability for the northern half of the state. “Our analysis pretty much indicates that we need more capacity along that corridor,” Wood said Tuesday when asked about the latest announced plans by Marathon Oil to develop an LNG receiving terminal, pipeline and power plant near Rosarito. The Sonoran pipeline would have followed the route of El Paso and Transwestern, but extended in California all the way to San Francisco. Wood noted that Questar (Southern Trails) and Transwestern are proposing adding up to almost 300 MMcf/d, but the now-canceled Kinder Morgan proposal was to bring an added 1 Bcf/d into California.

“I don’t understand why El Paso is not going forward with expanding its system (in California),” Wood said. The first phase could be in by next winter, converting part of an idle Texas-to-Long Beach oil pipeline to a natural gas line from the Permian Basin to Ehrenberg, AZ. “They’re in the process of cleaning and adding capacity to that portion of the old All-American oil pipeline,” he said. “It may or may not be incremental, but that depends on the market response. Then you also have the portion from Ehrenberg to Daggett, CA, for which El Paso is just completing a renewed open season to test market interest.”

Along with El Paso, another key player in both LNG and future capacity for California and the Southwest is Sempra Energy, with geographical proximity and a handful of other energy projects already under way in Mexico. Its spokesperson expressed no concern Monday that the northwest Pacific coast of Baja California may be getting too crowded with proposed LNG terminals and natural gas pipelines now that Marathon Oil unveiled its plans last week (see NGI, March 4).

“There have been several companies that have announced, but obviously we believe we have the most viable project,” said Sempra Energy corporate spokesperson, Doug Kline, who noted that Sempra’s project is also located southernmost from the U.S.-Mexican border, about 60 miles away, just south of Rosarito.

The El Paso/Phillips Petroleum and Marathon projects are located to the north in Rosarito Beach, where electric generating plants and 40-year-old Pemex oil tanks cause environmentalists and local residents concerns.

Besides added gas transmission pipeline capacity into California and the Southwest, displacement on some of the existing east-of-California interstate pipeline could raise the total capacity from new LNG sources to about 1.5 Bcf/d, Wood said, including physically displacing the added 500 MMcf/d. “That would bring you up to the equivalent of two LNG terminals,” said Wood. “But the question is will the Mexican (local governments) really allow two terminals down there?

Mexico’s federal government is encouraging the LNG plans, but the ultimate fate of the proposals rests with local governments in the cities of Tijuana on the border, Rosarito and Ensenada.

Sempra Energy’s Kline said his company doesn’t feel the added competition for LNG receiving terminals will complicate the Mexican approval process, which has not started yet. “We’re moving ahead with our plans as we’ve outlined,” he said. Sempra is partnering with Michigan-based CMS Energy, owner of the existing Lake Charles, LA LNG terminal on the Gulf Coast, on the LNG plans and with PG&E Corp.’s National Energy Group on the natural gas pipeline. The Sempra/CMS two train LNG project would deliver about 800 MMcf/d. The companies have signed a memo of understanding to import LNG from Bolivia.

Elsewhere in Mexico, Sempra International has partnerships with Mexican business interests to develop natural gas distribution systems in Mexicali and two other northern Mexico population centers; it is building a new gas-fired power plant in Mexicali, the first one south of the border that will sell its entire output into the U.S.; and construction is well under way on both sides of the border for the North Baja natural gas transmission pipeline from a point off the El Paso system near Ehrenberg, AZ, south through California and into northern Baja California where it will run west to Mexicali and then into Tijuana, south of San Diego.

The Marathon partnership includes partners Pertamina, the Indonesian oil and LNG exporter, Golar LNG Ltd., which builds and owns LNG tankers, and Grupo GGS S.A. de C.V, a Mexican company that builds energy infrastructure. Its proposed LNG terminal near Tijuana would produce 750 MMcf/d. The project also calls for a 400 MW gas-fired power plant on the site.

The El Paso/Phillips proposal would draw on Australian LNG from an export facility to be built by Phillips. It would produce 680 MMcf/d. The receiving terminal is part of El Paso’s announced goal to become a leading U.S. LNG merchant by building as many as six new LNG terminals. Currently, an El Paso subsidiary owns the Elba Island, GA LNG terminal and holds long-term capacity at the Cove Point, MD LNG facility, which is being reactivated, and it is importing LNG at CMS Energy’s Lake Charles, LA terminal.

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