| $500 million project planned off Mexico coast |
By David Wichner ARIZONA DAILY STAR Arizona and Sonora, Mexico, could benefit from a new liquefied-natural-gas project planned off the coast of Mexico within the next few years. A Texas company plans to build a $500 million LNG terminal on the Gulf of California, about 200 miles southwest of Tucson, by 2008. Sonora Pacific Mexico, a subsidiary of Houston-based DKRW Energy LLC, expects to win Mexican government approval by year's end for an LNG terminal at Puerto Libertad, Sonora, about 120 miles south of Puerto Peñasco, said Tom White, DKRW managing partner on the project. If all goes as planned, construction could start by early 2006 and be completed in about three years, White said. Pipelines that would be constructed in partnership with a subsidiary of El Paso Corp. would bring the "regasified" natural gas to Sonora and Arizona, giving retail providers like Southwest Gas Corp. more supply options. "It ought to improve the gas economics for consumers, both in Sonora and in Arizona, certainly," said White, a former Enron Corp. executive who served as secretary of the Army from 2001 to 2002. The company has won the backing of local officials and is working to get federal permits and sign up LNG suppliers, White said. If approved and constructed as planned, the plant would begin operations by late 2008 or early 2009, processing up to 1.3 billion cubic feet of gas per day. About 500 million cubic feet of gas is expected to be consumed in Sonora, with the remaining 800 million cubic feet available for export to the Southwest U.S. El Paso Corp., which operates virtually all of the natural gas pipelines in Arizona, has agreed to build up to 350 miles of pipeline to deliver the gas to Sonoran cities including Naco, Hermosillo and Guaymas. An export pipeline would interconnect with El Paso's interstate pipeline system at the border and gas would be transported through the company's main lines for further distribution in the Southwest U.S. Roland Harris, a consultant with El Paso Natural Gas in Colorado Springs, Colo., said the Tucson and Phoenix gas markets would get first crack at the gas from the Puerto Libertad LNG terminal by virtue of location. Any gas Arizona doesn't soak up could go to California or be routed back east to New Mexico or Texas, Harris said. "Arizona is the one of the fastest growing gas markets in the U.S.," Harris said. "We see this as a new supply for Arizona." El Paso is still considering pipeline routes, including a possible route through the Nogales area, Harris said. An official of Las Vegas-based Southwest Gas Corp., Arizona's largest retail supplier of natural gas, said the new gas sources would provide welcome for new sources of the commodity. Bill Moody, Southwest Gas vice president of gas resources, said it's too early to tell the eventual impact on gas costs, but more supply generally pushes down prices. The gas Arizona consumes currently originates in the San Juan Basin in the Four Corners area of New Mexico and the Permian Basin of Texas. "Certainly, in a macro sense, any new supply that is brought into the Southwest, including Texas, should have a downward impact on prices," Moody said. That would be welcome news to Arizona customers of Southwest Gas. Due to tight supplies regionally and nationwide, the commodity portion of Southwest Gas bills - which reflects what the company pays for gas - jumped more than 66 percent from 1999 to 2004, Southwest Gas spokeswoman Libby Howell said. State regulators also welcome new sources of gas and pipelines. Concerned over tight supplies and limited pipeline capacity in the state, the Arizona Corporation Commission in 2003 formally launched a study of how to boost the state's gas infrastructure. "With the new (gas-fired) power plants, with the growth in the Southwest, with the need to draw new companies here, Arizona needs new natural-gas pipeline capacity," Corporation Commission spokeswoman Heather Murphy said. Meanwhile, a San Diego company plans to build a similar LNG terminal on the coast of Baja California, near Ensenada, that would begin operations in 2008. According to plans filed with the Corporation Commission by Sempra Energy, the $500 million Energía Costa Azul terminal would be connected to the Phoenix gas network via a pipeline from near Yuma. ● Contact reporter David Wichner at 573-4181 or dwichner@azstarnet.com.
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