Baja California authorities expropriate Marathon LNG site properties

March 2, 2004
Baja California state authorities Saturday announced the expropriation of 847 hectares that a Marathon Oil Corp. subsidiary had identified as the site of its proposed LNG complex, said George Baker, Houston-based energy consultant and editor of Mexico Energy Intelligence.

By OGJ editors

HOUSTON, Mar. 2 -- Baja California state authorities Saturday announced the expropriation of 847 ha that a Marathon Oil Corp. subsidiary had identified as the site for a proposed LNG complex, said George Baker, Houston-based energy consultant and editor of Mexico Energy Intelligence.

"The extent of the authority of Mexican states to expropriate private lands for public use is not known to us at this time," Baker said.

Mexico's Energy Regulatory Commission last year awarded a natural gas storage permit to Marathon's unit Gas Natural Baja California S de RL de CV (GNBC) and its partners Grupo GGS SA de CV and Bermuda-based Golar LNG Ltd., paving the way for construction and operation of the LNG storage facility near Tijuana (OGJ Online, May 12, 2003).

However, since then there has been an intensification of political battles stemming from the position of environmentalists, the public's NIMBY ("not in my back yard") attitude, and from fishing and other interests (OGJ Online, Feb. 3, 2004).

Even the threat of expropriation put Marathon's project in jeopardy, Baker reported, as the company says the "El Monumento" site offers the optimal location for its multifaceted, LNG-based project. The complex would contain an LNG offloading terminal, a 750 MMcfd regasification plant, a 1,200 Mw power generation plant, a 20 million gpd water desalination plant, wastewater treatment facilities, and related gas pipeline infrastructure (OGJ Online, Mar. 1, 2002). Startup was planned for 2006.

"The strong impression from news reports is that the decision to expropriate the Marathon site was taken without the prior approval of the Executive branch—or even without prior consultations," Baker said.

Mexican President Vincente Fox's visit to Mexicali Mar.10 undoubtedly will have the status and future of Baja LNG projects on his agenda of meetings with the governor and other state officials, the Mexican press reported.

Other LNG projects
Other LNG projects planned for Baja California also may be facing difficulties: Although ChevronTexaco Corp. wants to construct a receiving terminal and associated facilities offshore, where it might be more environmentally acceptable, last week Mexican senators from the liberal Institutional Revolutionary Party (PRI) and the leftist Democratic Revolution Party (PRD) said ChevronTexaco's proposed use of federal waters near the Coronado Islands was "tantamount to ceding national territory to a foreign company." Sen. Manuel Bartlett of PRI told the Mexico City press Friday that the Senate was gathering information about this matter, as they contend it indicates a "violation of the Constitution."

A joint venture of Shell International Gas Ltd. and Sempra Energy LNG Corp. late last year announced a competing project in Costa Azul, 14 miles north of Ensenada, that is planned for operations in 2007. Shell at that time said terminal permitting activities with the Mexican authorities were "well advanced" (OGJ Online, Dec. 23, 2003).

And last month, Spain's Repsol-YPF SA announced a plan to construct a $350 million LNG regasification terminal much further down the coast south of Manzanillo at Port Lázaro Cárdenas (OGJ Online, Feb. 19, 2004).