The LNG market on the west coast is in its infancy. Sempra Energy’s Costa Azul LNG project has perhaps received the most attention in California. This project includes a land-based receiving facility and related port infrastructure. The project site has more than 400 acres of undeveloped land, remote from residential areas. There are two full containment tanks, open rack seawater vaporizers, and a 42-mile 36 to 42-inch diameter spur pipeline connecting the terminal to the Bajanorte Pipeline. The average natural gas production capacity is 1,000 million cubic feet per day, with a peak production capacity of 1,300 million cubic feet per day. The storage capacity of these 2 tanks is 320,000 cubic meters. The approximate project cost is $875 million. The projected on-line date is 2008.
On November 5, 2007 the Commission issued, “Order Instituting Rulemaking to Determine Issues Relating to the California Utilities’ Procurement of Natural Gas Supplies from Liquefied Natural Gas Sources.” (OIR). The scope of the OIR is to (1) provide guidelines over whether and how the Pacific Gas & Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), and Southern California Gas Company (SoCalGas) should enter into procurement contracts with LNG suppliers; and (2) provide the process under which these utilities may seek approval for the procurement contracts with LNG suppliers.”
The OIR asked for comments from Respondents and interested parties. Pursuant to Rule 6.2 of the Commission’s Rules of Practice and Procedure and the OIR Ordering Paragraph 6, the Division of Ratepayer Advocates (DRA) provided comments on the issues identified in the OIR. In summary, DRA recommended that gas utilities continue to purchase natural gas consistent with the approach to gas procurement that has been followed for a number of years. DRA argued that LNG supply will be marketed and introduced in the California market when the economics are right, and that the LNG market does not require specific guidelines over whether and how the utilities should enter into contracts with LNG suppliers. DRA also recommended that the Commission reaffirm the process for review of LNG contracts that was established in D.04-09-022.