Regional LNG: BHP plans California gas terminal: Report

BHP Billiton, Australia's biggest energy company, is planning to spend as much as $600 million to build a liquefied natural gas terminal off the Californian coast, which aims to supply almost 15 percent of the state's gas demand, Bloomberg reported Monday.

The floating terminal would be located in deep water about 20 miles, or 32 kilometers, off the coast, BHP Billiton said Friday. The terminal, the first of its kind, would be connected by an underwater pipeline to the shore so that gas could be pumped into the local utility network, starting in 2008.

The Federal Reserve chairman, Alan Greenspan, has warned that a looming shortage of the fuel poses risks to the American economy and has called for more imports. BHP Billiton's rivals such as El Paso Corp. are investing more than $3 billion to build LNG depots to meet rising demand, which has seen prices jump 33 percent in the past year.

"Everyone agrees, from the Federal Reserve chairman, Alan Greenspan, to the California Energy Commission and Public Utilities Commission, that nationwide in the U.S., we're facing a critical natural gas supply problem," said Patrick Cassidy, a spokesman for BHP Billiton in Houston.

The BHP Billiton import terminal, named Cabrillo Port, would take LNG that has been cooled to a liquid for transport by tanker and convert it back to gas. Gas could be supplied from projects in the Pacific Rim and Australia, including Australia's $6 billion North West Shelf LNG venture, in which BHP Billiton has a one-sixth stake, Cassidy said.

"Maybe BHP Billiton is playing the game more so from the angle of the distributor as opposed to an upstream supplier," said Ric Ronge, senior investment manager at Invesco Asset Management in Melbourne. "If they can also leverage their own volumes into it, then it's a win-win, but I'm a little bit skeptical of the ability for BHP to do that."

BHP Billiton faces competition to supply the United States with LNG. Exxon Mobil, said Wednesday it aims to expand its LNG business six-fold by 2020 and control a fourth of the American market. As well as El Paso, ChevronTexaco, Marathon Oil and Sempra Energy have plan to build LNG terminals along North America's Pacific coast.(*)