San Diego Business Journal

Sempra LNG said May 15 that its new liquefied natural gas terminal is now operational in Baja California, Mexico.

The $1 billion facility is the first LNG import facility on the West Coast, located at an isolated docking facility 14 miles north of Ensenada.

Known as Energia Costa Azul, the terminal is capable of processing 1 billion cubic feet of natural gas per day.

The state of California uses approximately 6 billion cubic feet of natural gas per day.

LNG, natural gas that has been cooled and converted to liquid form for storage and transport ease, takes up about 1/600th the volume of natural gas, making it more cost-efficient for transporting by specially constructed oceangoing ships.

While the U.S. Southwest would likely receive some of the terminal's natural gas production, Sempra spokesman Art Larson said the primary benefactor will be Mexico's Western Baja California region.

"Baja's gas infrastructure is isolated from the rest of Mexico's energy supply, so there's been a significant need for a local source of natural gas serving this area," Larson said.

On a peak day, he said that Baja could use as much as 50 percent of the facility's gas production, which will fluctuate depending on supply. The remaining production would go to California, Arizona and other Western states.

San Diegans Could Benefit

Michael Shames, executive director of the Utility Consumers' Action Network, says the terminal could benefit San Diegans.

"There's the small insurance that if local gas pipelines were ever compromised in any way, we are in close proximity to the LNG terminal," said Shames.

He said that San Diego Gas & Electric Co., Sempra LNG's sister company, has argued that opening the Baja terminal creates competition.

Larson said that while a contract is in place for the new terminal to provide natural gas to the electric power generating plant in Rosarito no long-term contracts have yet been signed to supply Southern California utilities.

Sempra's announcement is probably good for Sempra overall, Shames said, but future demand for natural gas as prices rise may leave some question.

"Their business model was likely based on the natural gas price of $4 per million Btu, and now it's close to $15 per million," said Shames. Because prices have more than tripled, Shames said the added expense could mean less of a demand for natural gas in the long term.

"Natural gas is used for heating, but in Baja, it makes a whole lot more sense to use the sun for heating rather than natural gas," he said.

A second Sempra LNG receipt terminal, Cameron LNG, is under construction near Lake Charles, La. The project, capable of processing 1.5 billion cubic feet of natural gas per day, is scheduled for completion by the end of the year.

Sempra LNG is an unregulated division of Sempra Energy.