Regional LNG: Sempra moves forward on Baja LNG terminal: Report

Sempra LNG, a unit of San Diego-based Sempra Energy has begun construction on a new liquid natural gas (LNG) facility, Energia Costa Azul, 14 miles north of Ensenada, which will begin operation in 2008, San Diego Daily Transcript reported Tuesday.

The facility, which is nearly a $1 billion project, is located in Baja California as a result of increased natural gas demands, which are expected to double by 2010. This new facility will put Baja in charge of its gas supply instead of having to import it from California.

There?s a strong market for it (natural gas) down in Mexico. Before Mexico was at the end of the pipeline, so when there were natural gas shortages Baja was curtailed. They expressed an interest in a new reliable source of natural gas, said Art Larson, spokesman for Sempra Energy. Now they?ll be at the head of the pipeline.

LNG is natural gas that has been cooled to -260 F. Once the gas reaches this temperature it becomes a liquid. When natural gas takes a liquid state it takes up to 600 times less space than in its gaseous state, making it easier to ship long distances. Once the LNG reaches its destination, its returned to a gaseous state and put in pipelines.

Larson said the facility, which is one of four LNG facilities owned by Sempra LNG, met resistance regarding environmental permits and land use, but these legal challenges were without merit and haven?t hindered the projects progress.

The facility will be solely owned by Sempra and will produce 1 billion cubic feet of natural gas per day, Larson said. Half of the total natural gas produced a day will belong to Shell, which signed a 20-year agreement with Sempra.

The pipeline connected to the facility will run across northern Baja through Mexicali and connect with a pipeline that runs into Arizona, with a potential to connect to a California pipeline. Any excess natural gas will go to California and Arizona.

Techint SA de CV, Black & Veatch, Mitsubishi Heavy Industries and Vinci Construction Grands Projects were awarded the approximately $500-million primary engineering, construction and procurement contract. A joint venture involving the Costain Group PLC and China Harbour won the construction contract for the projects $170 million breakwater. At the peak of construction, the facility could have 1,500 workers on site.

On Oct. 12, 2004, Sempra LNG announced a supply agreement with BP and its Tangguh LNG partners for the supply of 3.7 million tons of LNG per year, (500 MMcf/day) from Indonesia to Energia Costa Azul. (*)