Following one day after a ChevronTexaco (CVX) affiliate made similar news, Shell Gas & Power on Tuesday announced that it has exchanged letters of understanding with Australia’s Gorgon joint venture for the long-term supply of liquefied natural gas (LNG) to Shell’s proposed LNG importation and regasification terminal in Baja California, Mexico.

This could lead to volumes in the order of 2 million tons per year over a period of 20 years. The Gorgon joint venture participants include ChevronTexaco (4/7th interest and operator), Shell (2/7th interest) and ExxonMobil (1/7th interest). Located offshore Western Australia, the development has certified proven hydrocarbon reserves of 12.9 Tcf, with the Greater Gorgon Area containing expected reserves in excess of 40 Tcf.

“We’re delighted to have been able to identify a new supply of gas from a Shell equity project to help meet Mexico’s growing energy needs,” said Catherine Tanna, Shell Gas & Power director, Americas. “The Gorgon project, with its massive reserves, is well placed to provide Mexico with a reliable, clean and economic source of LNG.”

Shell said it is currently proposing to locate a new LNG import terminal in Costa Azul, 23 kilometers north of the city of Ensenada on the west coast of Mexico. According to specs, the terminal will have a capacity of 7.5 million tons of LNG per year (equivalent to 1,000 MMcf/d) and is expected to begin operations in 2007. Terminal permitting activities with the Mexican authorities are well advanced. The target markets for the regasified LNG are power plants, industrial customers and utilities in northwest Mexico and Southern California.

On Monday (see Daily GPI, Aug. 5), CVX signed a similar memorandum of understanding with Gorgon Joint Venture in Australia for up to two million tons annually of LNG supplies to West Coast markets.

CVX and Shell are two of the four U.S.-based companies with a proposal to build an LNG receiving terminal along the Pacific Coast of North Baja California in Mexico. It is one of three still awaiting approval from the Mexican federal energy commission, from which action is expected in the near future, according to a Mexican federal energy official who spoke last week in Denver at a FERC technical workshop on western energy infrastructure.

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