Shell, El Paso Mexican LNG terminal to serve power demand

br>By the OGJ Online Staff

HOUSTON, June 28 -- Shell Gas & Power, a group of companies owned by Royal Dutch/Shell Group, and El Paso Global LNG, a subsidiary of El Paso Corp., Houston, will jointly develop a liquefied natural gas regasification terminal at Altamira, Tamaulipas state, on Mexico's east coast.

The $300 million terminal will target fast growing gas demand in northeastern Mexico, largely driven by electric power demand growth. It will also help meet overall Mexican demand, said the companies.

Mexico is in dire need of new power supplies. Economists say Latin America's No. 2 economy could face blackouts by about 2004, if it does not expand generating and transmission capacity. While Mexico has opened its largely state-run power sector to some private investment in recent years, officials concede the nation must liberalize the industry further to lure new private investment.

Mexican President Vicente Fox is expected to submit an electricity power reform bill to Congress in September to pave the way to new private sector capital, which the government is hoping will pick up the cost of about half of the $50 billion Mexico needs in new power infrastructure over the next 10 years.

Leaders of the state power company also want to convert oil-fired plants to natural gas.

Shell and El Paso did not reveal initial capacity of the terminal, saying only that it will be sufficient to meet demand in Altamira's immediate area. They said it would be expandable to 1.3 bcfd.

The companies said their 50:50 joint venture has acquired rights to land at the Altamira port and has begun design studies. Joint development allows the project to be built faster and cheaper, they said.

The regasification terminal is planned to begin LNG imports in the first half of 2004. The sponsors did not reveal the planned source of the LNG. But they said the Shell-El Paso project will market gas directly to the Mexican state energy company Petroleos Mexicanos, industrial users, and power producers.

Mexico's Energy Sec. Ernesto Martens Rebolledo said the project is one of a set being evaluated by the Mexican authorities for the country's LNG supply.

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