Sempra, Shell Begin Work on Baja LNG Terminal

By Published On: September 11, 2004

Despite legal challenges, Sempra Energy quietly began work on the $600 million Energia Costa Azul liquefied natural gas import terminal some 14 miles north of Ensenada on the Baja California peninsula. Last week?s California Public Utilities Commission decision to allow LNG to cross the U.S.-Mexico border at Otay Mesa (<i>Circuit</i>, September 3, 2004), coupled with previous Mexican approval of Costa Azul, appears to have placed Sempra and its partner Shell International Gas way ahead of competitors still seeking terminal construction permits. ?We should have it [the terminal] fully constructed by the end of 2007,? said Sempra spokesperson Art Larson. The companies began building an access road at the site last month soon after a Mexican court on July 5 removed the last injunction against construction, said Larson. The road is the first step to launching full-scale work on the terminal, which will begin late this year after Sempra chooses a building contractor. Meanwhile, Sempra is completing the details of a contract with BPMiGas and British Petroleum to supply 500 MMcfd from Indonesia?s Tangguh LNG liquefaction facility, said Larson. The Baja terminal ultimately could receive up to 1 Bcfd of natural gas. ?They?ve raised the ante,? said George Baker, president of George Baker & Associates, a Houston-based Mexican energy market analysis firm. ?Whether they have three aces or not, nobody knows.? Baker characterized the Mexican judicial system as ?unpredictable.? He noted that Greenpeace?which tallies some 15 pending lawsuits challenging environmental permits for the project?is posing serious opposition to the Sempra-Shell project, as well as ChevronTexaco?s proposed offshore terminal near South Coronado Island. To galvanize that opposition, Greenpeace this week conducted a tour of the Coronado Islands for government officials and the media. During the tour, Greenpeace released a report concluding that U.S. companies are seeking to build LNG import terminals just over the border in Baja California to dodge U.S. environmental standards and community opposition. If they succeed, the report said, the companies will turn northern Baja California into a ?dirty energy zone? at the expense of its tourist-based economy and its aspirations to become a renewable energy center. On a 65-foot sport fishing boat that Greenpeace chartered to tour the islands, government officials and news reporters crowded the deck to hear U.S. and Mexican environmentalists argue that renewable energy and conservation could eliminate the need for LNG and its environmental impacts. As they spoke, the boat drifted along the leeward side of South Coronado Island, where ChevronTexaco proposes a terminal 600 yards from a cove once home to a casino reputedly owned by Al Capone in the 1930s. Today, the cove is a lonely outpost for the Mexican Navy on the desert island inhabited mainly by sea lions, pelicans, rare birds, succulents, and sagebrush. ?LNG is a roadblock to us in maintaining and achieving renewable energy,? said Kristin Casper, Greenpeace clean-energy campaign coordinator. She said that if California turns to LNG, it will mark a serious blow to the worldwide renewable energy movement because of the state?s leadership position. Wildlife biologists on board said the ChevronTexaco terminal would threaten rare nocturnal birds that roost on the island?such as the murrelet?as well as vegetation and marine life. The facility, for instance, would use 100 million gallons a day of seawater to regasify the minus-260 degree Fahrenheit liquid gas, cooling the water?s temperature by about 20 degrees in an instant. Releasing the colder water back into the ocean would harm marine life, according to Greenpeace. To mitigate that impact, Greenpeace suggested burning a small amount of the gas to regasify the LNG and using a catalyst to control the resulting air pollution. However, that would produce carbon dioxide emissions. ChevronTexaco studies show that using the seawater to regasify the liquefied natural gas would have little impact on marine life because the terminal would be located over a sandy bottom area, according to company spokesperson Santana Gonzalez. Fish, kelp, and other aquatic species prefer rocky areas around the island, which will not be affected by the terminal, he added. Regarding other environmental impacts, ChevronTexaco plans to minimize the use of lights at the terminal and use shields to prevent light scattering that would affect nocturnal birds, said Gonzalez. In addition, he said, the company has hired ornithologists to perform further studies of the potential impacts on birds in the area and will take additional steps if needed. ChevronTexaco is awaiting permits for the project from various Mexican authorities and plans to go ahead with construction whether or not Sempra manages to open its terminal first, according to Gonzalez. The natural gas market in Mexico and the United States is sufficient to support two terminals, he said. Meanwhile, news of Sempra?s construction activity farther south angered Mexican environmental activists, who have been seeking to shut it down in a series of weekend protests, according to Casper. At the heart of their opposition is their feeling that Mexico will bear the safety risks and impacts of LNG but receive few of the benefits, said Olga Martinez, a member of the Citizens of Baja California Committee Against Multinational LNG and Electric Plants. LNG is incompatible with the region?s growing $3 billion a year tourist industry, according to the committee. Members of Greenpeace Mexico added that LNG would conflict with planned renewable energy developments in Mexico, including a 340 MW wind project being planned by Fuerza Eolica in the mountains between Tijuana and Mexicali. However, energy company spokespeople maintained that Mexico will benefit from the LNG facilities because they will provide needed natural gas and additional jobs in the area.

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