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Mexican Energia Costa Azul owned by U.S. Sempra's IEnova gets licenses to export US LNG out of Mexico



By Argus

Petroleumworld 04 04 2019

The US Department of Energy (DOE) has authorized the Energia Costa Azul (ECA) LNG export project in northwest Mexico to re-export US pipeline gas as LNG to countries that do not have free trade agreements (FTAs) with the US.

The DOE on 29 March issued two 20-year non-FTA export licenses to ECA, which is owned by Mexico City-based Infrastructure Energetica Nova (IEnova), which in turn is 66.43pc owned by San Diego-based Sempra Energy.

One license authorizes the re-export of up to a gas equivalent of 440mn cf/d (4.5bn m³/yr) from a planned first-phase with baseload capacity of 2.4mn t/yr, equivalent to 307mn cf/d of gas, from one liquefaction train.

The second license authorizes the export of up to a gas equivalent of 1.3 Bcf/d from a planned two-train project with combined baseload capacity of 9mn t/yr. Ienova previously said the larger project would have capacity of 12mn t/yr.

Both projects are scheduled to start construction in the first part of 2021 and start commercial operations by 2025, ECA told the DOE. Sempra previously said it hoped to start exporting from the smaller project by 2023.

The smaller project in November signed preliminary deals for all its planned capacity. Sempra has said it plans to finalize the 20-year deals with France's Total and Japanese companies Tokyo Gas and Mitsui, each for 800,000 t/yr, this spring.

ECA has drawn significant interest because it is a brownfield project located on the Pacific coast. That would allow it to ship US LNG to major Asian markets significantly faster and more cheaply than from the US Gulf coast, without paying tolls to cross the Panama Canal.

ECA is an LNG import terminal 19 miles (31km) north of Ensenada, Baja California, built to primarily serve southwestern US markets. It came on line in 2008 but it has been mostly unused for several years because of the North American shale gas boom. The facility is 31 miles south of the San Diego-Tijuana, Mexico border.

The terminal has two LNG storage tanks, each with capacity of 160,000m³, equivalent to about 3.3 Bcf of gas, so the first phase would not need additional storage.

The DOE licenses do not require ECA to identify which US pipelines it would use to bring gas to Mexico, as "the natural gas pipeline trade between the US and Mexico is robust, such that multiple border-crossing points are currently available for ECA's use," the DOE said.

Sempra plans to primarily use cheap gas from the oil-rich Permian basin in west Texas and southeastern New Mexico, but it also could use gas from the Gulf coast, the midcontinent and Rocky Mountains.

ECA told the DOE that the current gas pipeline export capacity from the US and Mexico is about 14.8 Bcf/d. The company is considering several supply options for the first phase, including TransCanada's North Baja pipeline, which extends about 80 miles from Kinder Morgan's El Paso Natural Gas system near Ehrenberg, Arizona, to the US-Mexico border near Ogilby, California. The North Baja system then connects in Mexico to the Gasoducto Rosarito, a pipeline owned by IEnova.

ECA is also considering for the first phase using Kinder Morgan's Sierrita gas pipeline, which extends from 61 miles from the El Paso system near Tucson, Arizona, to the US-Mexico border near Sasabe, Arizona; Energy Transfer's 195-mile, 1.1-Bcf/d Comanche pipeline, which extends from the Waha hub outside Fort Stockton, Texas, to the US-Mexico border in San Elizario, Texas; ONEOK Partners' Roadrunner Pipeline, which extends from Coyanosa, Texas, to San Elizario, Texas; and Energy Transfer's 148-mile, 1.4 Bcf/d Trans-Pecos pipeline, which runs from Waha hub to the US-Mexico border near Presidio, Texas.

The larger phase would require an additional 160,000m³ storage tank and the proposed Northern Mexico Pipeline that would be built by a third party to connect to new or existing pipelines in northern Mexico, ECA told the DOE. ECA is looking at the Sierrita, Comanche Trail and Trans-Pecos pipelines to bring US gas for the larger project, it said.

The DOE in January authorized ECA to export up to 0.5 Bcf/d of US pipeline gas to Mexico and re-export it as LNG to FTA nations for the smaller project, and for the larger project to export up to 1.49 Bcf/d of US pipeline gas to Mexico and re-export as LNG to FTA countries. ECA plans to use for the smaller project 60mn cf/d of the gas in Mexico for liquefaction and pipeline transportation, and for the larger project it would use about 190mn cf/d of US gas for those purposes.

Both projects have received all required Mexican regulatory approvals, ECA said.



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