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Mexico's Costa Azul re-exports first LNG cargo

By Ron Nissimov | Platts
Tuesday, January 10, 2011

Houston - Sempra Energy's Energia Costa Azul LNG import terminal in Baja California, Mexico, recently re-exported its first cargo under a one-time authorization from Mexican authorities, but has no plans to seek authorization to do so on a long-term basis, a Sempra spokeswoman said Monday.

Spokeswoman Kathleen Teora said she could not discuss any details of the re-export, but did say that the facility has not re-exported any other cargoes since it came online in May 2008.

An industry source said the re-export was likely part of a swap between San Diego-based Sempra and the UK's BG. The re-export was loaded at Costa Azul on January 1 on BG's 145,000 cubic meter (equivalent to 3.1 Bcf of gas) Methane Nile Eagle bound for Chile, the source said.

Meanwhile, BG's 145,000 cu m Methane Jane Elizabeth on January 6 delivered a cargo to Sempra's Cameron LNG terminal in Cameron Parish, Louisiana, the source said.

The cargo that arrived at Cameron LNG came from Egypt's Damietta liquefaction plant, the source said, while the cargo that was reloaded at Costa Azul came from Tangguh LNG.

The swap helped Sempra because it needed to import a cargo into Cameron LNG to keep its equipment there at the correct temperature, the source said.

Sempra only has a long-term LNG contract with Indonesia's Tangguh LNG to supply its Costa Azul terminal, so without the swap, it would have had to turn to the spot market for the cool-down cargo, likely at a price of $7-$8/MMBtu, the source said.

That would have been significantly higher than US Henry Hub gas prices. The NYMEX February gas futures contract closed at $4.434/MMBtu on January 6.

Instead, Sempra completed a straight swap with BG and paid the same price for the Cameron LNG cargo that it pays for the Tangguh cargoes it receives at Costa Azul, the source said, in the range of $3-$4/MMBtu.

Sempra's Tangguh contract is priced at a discount to the Southern California border gas price, Sempra officials have said, without revealing the amount of the discount.

Costa Azul is designed to serve the US Southwest and Mexican markets.

BG benefitted from the swap because it has a long-term contract to supply Chile's Quintero LNG terminal on the Pacific Coast, but only has long-term contracts with Atlantic Basin suppliers for LNG, so it typically brings Atlantic Basin LNG to Chile, the source said.

In this case, it already had a ship in the Pacific Basin, and so it saved about 20 days in shipping costs from the deal, the source added. The cargo is still on its way to Chile, the source said.

In April, Sempra LNG CEO Darcel Hulse said Costa Azul was receiving a standard-sized cargo of about 3 Bcf every 12 days, and expected it to continue doing so because Tangguh LNG had ramped up to capacity.

The volume is equivalent to half of Sempra's term contractual volumes from Tangguh LNG, since Tangguh LNG has the right to divert half the volumes to higher-paying markets. The California market could absorb the sendout rate of 250,000 Mcf/d from Costa Azul deliveries, Hulse said at the time.


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