Sempra and Shell to Form Venture
Sempra Energy, the biggest U.S. natural gas distributor, and Royal Dutch/Shell Group plan to form a venture to build a $600-million liquefied natural gas terminal in Baja California, Mexico, combining two projects to reduce costs.
The terminal will be in Costa Azul on Mexico’s west coast, about 14 miles north of Ensenada. The project will be able to supply 1 billion cubic feet of gas a day, and about half will be used to meet growing demand in western Mexico, Shell and San Diego-based Sempra said in a statement. The rest will be sold in the southwestern U.S.
U.S. Energy Secretary Spencer Abraham said last week that more than $100 billion had to be invested in LNG projects by 2025 to meet the nation’s energy needs. Sempra, ChevronTexaco Corp. of San Ramon, Calif., and Exxon Mobil Corp. expect to lead a building spree of terminals needed to make up a supply gap as demand and prices rise, energy executives said.
“There’s going to be more consolidation because no one company has everything it takes,” said Robert L. Christensen, an energy analyst at Buckingham Research Group. “Shell brings to the project the resource, the transportation and the financing, and Sempra has the local markets.”
The Baja terminal is expected to open in 2007, Sempra said. Shell, Europe’s second-largest oil company, and Sempra will share investment costs and the terminal’s capacity equally. The companies had already obtained permits for terminals in the area.
“The decision to combine and develop a single successful project in Baja California blends the permitting, technical and logistical expertise required to get this project underway,” Donald E. Felsinger, head of Sempra’s non-utility energy businesses, said in the statement.
The project will eliminate duplication of pipelines and docks and reduce dredging, Shell spokeswoman Barbara Blakely said. A decision has not yet been made on expanding capacity to 2 billion cubic feet a day, the amount the two projects combined would have handled, she said.
Royal Dutch/Shell is owned by companies based in Britain and the Netherlands. Royal Dutch Petroleum, based in The Hague, owns 60%, and London-based Shell Transport & Trading owns the rest.
Shell will continue to lead another LNG terminal venture on Mexico’s east coast, Blakely said. Shell has 75% of that project and Total of France the rest, she said.
Shares of Sempra, owner of Southern California Gas Co. and San Diego Gas & Electric Co., rose 72 cents to $29.75 on the New York Stock Exchange. U.S. shares of Royal Dutch gained 11 cents to $50.94.
