ChevronTexaco unveiled a plan Thursday to build a liquid natural gas terminal off the coast of Baja California that would allow the company to fill the growing appetite for the fuel just across the border in the United States.
The facility, which is expected to cost $650 million, would enable ChevronTexaco to import natural gas from overseas fields such as those in Australia. Currently, the company has no way of importing supplies to the West Coast.
ChevronTexaco, based in San Ramon, is hoping to take advantage of what are expected to be high natural-gas prices during the next decade.
Dozens of new natural-gas burning power plants built in the United States during the past few years have increased the demand. But U.S. production can't keep up, because the fields, located mostly in Texas and the Gulf of Mexico, are mature and increasingly tapped out.
ChevronTexaco, along with several other multinational energy companies, are turning to a complex process known as liquification. It allows natural gas to be moved over great distances without the prohibitive cost of building underwater pipelines.
In this process, the gas is chilled into a liquid at minus 259 degrees Fahrenheit and then loaded onto a ship for transport. After reaching its destination, the load is converted back into gas by heating it back up.
"What you are seeing is a wide-scale industry recognition that continental supply will not be able to keep up with continental demand," said Michael Zenker, senior director for the North American natural-gas market for Cambridge Energy Research Associates, a research firm. "There's plenty of gas out there, it just happens to be overseas."
Only 1 percent of all U.S. natural gas supply is from imported liquid natural gas, otherwise known as LNG, according to the Energy Information Administration. But that amount is expected to rise sharply.
ChevronTexaco is planning to build the liquid natural gas terminal 10 miles south of the U.S.-Mexico border, near Tijuana. It would be located on a platform about 8 miles offshore.
The facility is expected to be able process up to 1.4 billion cubic feet of natural gas per day.
The initial phase of construction, to be completed in 2007, is supposed to handle about half that amount.
Building the terminal in Mexico may allow ChevronTexaco to avoid some of the permitting and public relations snags that other companies wanting to build in California have had to face. For example, Royal Dutch/Shell withdrew plans to build a liquid natural gas plant on Mare Island, in Vallejo, after complaints by local residents.
ChevronTexaco's plans for Mexico still face approval by Mexican authorities. Several other companies and joint ventures such as El Paso & ConocoPhillips, Marathon Oil and Royal Dutch/Shell are also seeking permits for onshore and offshore liquid natural gas facilities in Baja.
Some of the terminals, including ChevronTexaco's, could help supply Northern Mexico with natural gas.
In a press release Thursday, ChevronTexaco said that it is still considering building another liquid natural gas plant in California. It did not disclose any particular locations.
ChevronTexaco has filed an application to build a liquefied natural gas terminal off the coast of Louisiana in the Gulf of Mexico. There's no word yet on whether U.S. authorities will grant the necessary permits for that project, which was initially proposed in 2002.
The terminal in Mexico would probably play a role in a memorandum of understanding that ChevronTexaco signed with its Australian joint venture in August to supply about 2 million tons of liquid natural gas annually to the North American market during the next 20 years.
The joint venture is still seeking a permit in Australia to build the necessary export terminal there.
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