Sempra Energy Pulls Ahead in Race To Build LNG Terminal in Baja California

Sempra Energy's proposed liquefied natural gas terminal in Baja California received requisite permits, and the new facility could lop off 20 percent of the current price of natural gas. Mexico's Energy Regulatory Commission and the city of Ensenada issued final permits in mid-August. The company plans to begin construction next year. Sempra's proposed pipeline would carry one billion cubic feet a day of gas into existing pipelines between the United States and Baja California to serve end users in California and Mexico. The Golden State consumes six billion cubic feet a day of natural gas, and the additional supplies are expected to lower costs, said Donald Fellsinger, president of Sempra Energy Global Enterprises. Californians have been paying between $4.50/MMBtu and $5.00/MMBtu, but Fellsinger believes gas from the company's Energia Costa Azul terminal will cost power plants or other users $3.50/MMBtu. Sempra's proposed LNG terminal is one of five such plants slated for the Baja California coast, just south of the Tijuana?San Diego border, that energy companies developed following California's electricity crisis in 2000-01. Sempra and other energy companies are seeking to bring LNG to Baja California from countries around the world that lack developed natural gas markets. Natural gas can be liquefied by cooling it to minus 260 degrees Fahrenheit, a temperature at which it occupies 600 times less space than at room temperatures. Like petroleum, it can be shipped across oceans to industrial countries where it is needed. Once unloaded from ships, it regasifies as it slowly warms to atmospheric temperature and then is sent through pipelines to businesses and households. Royal Dutch/Shell, ChevronTexaco, and Marathon Oil Co. have proposed terminals in Baja California, and Phillips Petroleum and El Paso Corp. have made a joint proposal. Sempra, however, is ahead, say both the company and observers such as Chris Psenti of the environmental group Pro Peninsula. Mexico's Secretaria de Medio Ambiente y Recursos Naturales granted environmental approvals for Sempra?s terminal on the coast between Ensenada and the tourist town of Rosarita Beach this spring. The company hopes to have the $600 million facility built as early as 2006. But the approvals have not deterred local opposition. "Our area is 100 percent tourist-resort type development," said Roberto Valdes, president of Bajamar Real Estate Services and developer of the Bajamar resort community just a little more than a mile from Sempra's proposed site. "The introduction of a huge industrial complex will definitely change the outlook for the area." Valdes said that a group of attorneys are challenging the environmental approval, first through an administrative appeal process. Though Ensenada has asked Sempra to provide $15 million to upgrade municipal facilities, such as its boardwalk and public-works trucks, the final land-use permit and energy commission approval may be challenged. "We have not seen any documents, and until they are made public we will not know if a legal challenge is possible," Valdes said. "There are a thousand environmental issues, but the world obeys the power of money, and these companies are very powerful," he added. Sempra's proposed Costa Azul terminal is closer to developments than would be allowed in the United States, according to Psenti. Upscale communities of homes and condominiums?with their customary red tile roofs and white stucco walls?have risen along the barren and rocky coastline, once dotted only by tiny fishing villages. With the development, the local economy has become dependent upon U.S. and Mexican tourists, who flock to the scenic shoreline where gray whales migrate just beyond the surf line. Opponents of Sempra's plan contend that placing a large industrial facility with two looming tanks and a long pier for offloading tanker ships would be inappropriate in the resort area?where green golf courses now lie?and would interfere with the seasonal movements of the whales. To address these concerns, the groups have proposed that an LNG terminal be built offshore. However, Sempra spokesperson Doug Kline said the company has not considered an offshore facility. One has never been built, and it would raise the cost of the project, he said. A terminal built on the ocean floor could increase the total cost of the project by up to 20 percent, but a floating terminal actually could cost less than a land-based facility, according to Bill Powers, president of Powers Engineering in San Diego, who has provided technical assistance to community groups in Baja California on energy facility permitting. As challenges mount, the short-term outlook is for an adequate supply of natural gas in Southern California this winter, according to Rick Morrow, vice president of customer services for Southern California Gas. However, state energy officials fret over the longer-term outlook. "California needs more natural gas over the long haul," said James Boyd, a member of the California Energy Commission. As the economy recovers, he predicted, Californians will use more natural gas, which will put upward pressure on prices unless new supplies are developed.

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Sempra Energy Pulls Ahead in Race To Build LNG Terminal in Baja California

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