The New York Times: In Mexico, Anger Over Gas Terminals

By ELISABETH MALKIN

Published: June 16, 2004

EXICO CITY, June 15 - Fierce opposition to proposed liquefied natural gas terminals in Baja California has thrown into doubt the Mexican government's plan to end the country's dependence on United States gas imports.

Petróleos Mexicanos, the oil monopoly, is heavily taxed to finance the government's budget and is starved for cash to develop the country's abundant natural gas reserves. So Mexico imports, at high prices, close to 20 percent of the gas it uses. All of that comes from the United States.

"We are importing from an importer," said Dionisio Pérez-Jácome, president of the Energy Regulatory Commission, the Mexican federal regulator for private energy investment. "It's always better to be at the beginning of the chain rather than at the end."

The government estimates that demand for natural gas will grow 6.8 percent a year through 2012. Much of that is driven by rising electricity use because gas is needed to fuel new power plants.

L.N.G. is supercooled to a liquid state, shrinking the volume it occupies by a factor of 600 so that it can be transported by tanker to terminals close to markets. There, it is revaporized and piped to homes and industry. Building liquefied natural gas terminals, Mr. Pérez-Jácome said, would enable Mexico to import gas from distant new sources, like South America, Russia and Indonesia.

By diversifying the sources of gas, the plants will end Mexico's dependence on United States imports, which are more expensive than L.N.G. Pointing to California's energy crisis three years ago, Mr. Pérez-Jácome said L.N.G. imports would also reduce Mexico's vulnerability to disruptions in the American market.

Permit applications for three L.N.G. terminals are moving through Mexico's federal and state bureaucracies. Two terminals would be in Baja California, which covers the northern part of the peninsula. The third, the project that is furthest along, is at Altamira, a large industrial port on the Gulf of Mexico.

A fourth application, for Lázaro Cárdenas, a Pacific port further south, is expected soon.

The governors of Baja California and Sonora, another border state, are backing two more terminals, but those plans are still embryonic.

Opposition has concentrated on the two more advanced proposals for Baja California, a region where environmental awareness has increased sharply in the last decade, with critics raising environmental and safety concerns that recently shelved similar projects in Alabama, California and Maine.

Many opponents also say that the real purpose of the Baja California projects is to supply natural gas to California, putting Mexican communities at risk for America's energy needs.

Opponents are also expected to fight the new Sonora proposal, since it is in an environmentally sensitive area and will export gas to the United States.

However, in the United States, the Federal Energy Regulatory Commission is holding off approval of applications for new L.N.G. terminals, until a safety study is finished, probably by the end of the year, according to Joseph Kelliher, a commissioner at the agency.

Mr. Kelliher told Dow Jones last month that the agency wanted "better information" about risks before going forward with new projects.

In the first Baja California project, divisions of Royal Dutch/Shell and Sempra Energy, a company based in San Diego, are planning a $600 million project some 50 miles south of the border and need only a few permits to begin construction in the next few months, said Daniel Fobelets, manager of the joint venture for Shell.

The terminal will supply a billion cubic feet of natural gas a day, almost three times what the state of Baja California consumes, once the terminal is completed in 2007. Half will be exported to the United States.

The second proposal, from ChevronTexaco, calls for a $650 million offshore terminal on a platform eight miles off the coast of Tijuana and less than half a mile from the pristine South Coronado Island. If all permits are granted, construction would begin next year, said Carlos Atallah, vice president of ChevronTexaco de México.

The terminal would begin by processing 700 million cubic feet of natural gas a day in 2007, with 500 million cubic feet for Mexico and the remainder for California. Mr. Atallah said it was too early to say how much of the plant's eventual daily capacity of 1.4 billion cubic feet would go the United States.

Pointing to an accident this year in Algeria that killed more than 20 people, opponents argue that liquefied natural gas terminals are unsafe. They also say the proposed Baja California terminals threaten an already strained coastal environment. But what most infuriates them are the exports.

"The problem with these projects is that the gas is for the California market," said Arturo Moreno, coordinator of the climate and energy campaign for Greenpeace Mexico.

The gas, he said, could also go to fuel future power plants built to send electricity to the United States, as two electricity plants on the border at Mexicali already do. One, operated by Sempra Energy, sells all its power to the United States. The second, built by InterGen, a venture of Shell and the Bechtel Corporation of San Francisco, sends half its electricity north.

Energy companies talk about an integrated market, Mr. Moreno said, but "there is a double standard for environmental impact."

"We have more corrupt institutions,'' he said. "We have more lax environmental standards and much worse enforcement."

Mr. Pérez-Jácome, the regulator, said Mexican environmental and safety standards were "top of the line."

Executives on both projects say they pay heed to environmental concerns.

And, they say, both sides of the border will benefit.

"It is important to be able to export gas to the United States because that will stabilize the price in Mexico as well," Mr. Atallahof ChevronTexaco said. "The more gas you put in the system, the better for everyone."

But industry executives acknowledge that not all the proposals will succeed. "It's hard at this stage to say how many terminals are going to be built in Baja California," Mr. Atallah said.

Community opposition has already scuttled one proposal. In March, the Marathon Oil Corporation of Houston backed out of a plan to build a $1.7 billion energy complex south of Tijuana after the Baja California state government expropriated part of the land for the site.

Sergio Tagliapietra, the state's economic development secretary, said the government acted to resolve ownership disputes over the site, land he said was better suited for tourism or commerce. But he acknowledged that opposition from residents of Playas de Tijuana, an upper-middle-class Tijuana suburb about a mile away, influenced his decision.

The state government generally welcomes L.N.G. proposals, he said.

Wary of the growing weight public protests carry in Mexico, energy executives have taken pains to emphasize their contacts with the community. But opponents are not swayed.

"We are surprised that Chevron had the nerve to propose the project," said Alfonso Aguirre, director of a local nongovernmental organization, Conservacion de Islas, which is looking at legal options to block it. "They thought of this option because they could not build in an inhabited area."

Opponents of the Shell-Sempra project accuse the state government of subverting the zoning of the proposed site, which is in a section of the coastline closed to industry. Mr. Tagliapietra defended the interpretation, saying the terminal did not constitute industrial development.

Investors in the nearby tourist resort of Bajamar are fighting the Shell-Sempra proposal in court.

Shell and Sempra "have a public relations program that they carry out in Ensenada," said one of the developers, Roberto Valdes. "When we have expressed concerns they have said nothing. Next day in the paper they say everything is O.K."

http://www.nytimes.com/2004/06/16/business/worldbusiness/16gas.html