Sempra Energy signed a 15-year, $1.4 billion natural gas supply contract with Mexico’s electricity commission, Comision Federal de Electricidad (CFE), on Tuesday. The deal calls for Sempra to provide about 130 MMcf/d of gas to the CRE’s power plants in northern Baja California, including the Presidente Juarez power plant in Rosarito.

Sempra expects that most of the gas will be delivered via the Energia Costa Azul liquefied natural gas (LNG) import terminal, which Sempra and Shell are in the process of building about 14 miles north of Ensenada, Baja California. The LNG terminal is expected to be operational in 2008.

The cost of the natural gas to CFE will be priced based on the natural gas index prices at the Southern California border, Sempra said. Up to 1 Bcf/d will come through the LNG terminal. Half of that capacity will be owned and marketed by Shell subsidiary Coral Energy.

“As the energy needs continue to grow in Baja and the U.S. Southwest, we anticipate many others will follow CFE’s lead and tap the resources of the West Coast’s first LNG facility, said Mark Snell, Sempra Global group president.

Delivery volumes to the CRE will build over the life of the contract, starting at 45 MMcf/d and eventually peaking at 280 MMcf/d, said a Sempra spokesperson. The long-term CFE sales contract will consume more than one quarter of the 500 MMcf/d Sempra LNG is procuring from Indonesia. Last October, Sempra LNG announced a supply agreement with BP and its Tangguh LNG partners for the supply of 3.7 million tonnes of LNG per year, (500 MMcf/d) from Indonesia to Energia Costa Azul.

Sempra officials said this contract with CRE “validates” its strategy and the fact that it has the lead in bringing new LNG imports to North America. Construction of the North Baja LNG terminal will begin later this month.

CFE said its 15-year contract begins in 2008. The Mexican agency also said it expected to save an average of $20 million annually on its power plant fuel bills with the imported LNG supplies. The imports are cheaper than CFE’s current natural gas supplies from its sister federal agency, Pemex, Mexico’s national oil/gas company. Some of the CFE power plant supplies now come through the United States through Sempra’s North Baja Pipeline as supplies to cover shortfalls in the Pemex contract.

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