Shell pitches 'energy security'

Timetable is offered for Baja arrival of LNG

By Diane Lindquist
September 14, 2006

Shell Oil executives said yesterday that the company's first supplies of liquefied natural gas to fuel Baja California and California power plants will start arriving at a Baja California re-gasification facility by the third quarter of 2008.

V. Mark Hanafin, president and chief executive of the Shell Trading arm of the Shell group of global oil, gas and petrochemical companies, said slightly more than half of Shell's LNG tanker shipments, which will be re-gasified at the Energía Costa Azul terminal, will be sold to power plant customers on the U.S. side of the border.

Shell is sharing capacity in the $1.5 billion project being built by Sempra Energy on a seaside plateau 14 miles north of Ensenada.

Sempra is to receive its supplies from Indonesia, while Shell expects to use natural gas from Russia's Sakhalin Island. A liquefaction facility being built there isn't completed, Hanafin said.

When the Costa Azul facility goes on line in 2008, both companies will be offering the first supplies of LNG to the west coast of North America.

Last month, Shell introduced LNG to Mexico when a tanker of fuel from Nigeria arrived at its Terminal de LNG de Altamira on the country's east coast, near Tampico.

Fuel re-gasified at that facility is being sold to Mexico's state-owned Federal Electricity Commission.

Even as the global corporation is making major strides in providing North America with a relatively new form of fossil fuel from other parts of the world, Hanafin, U.S. Country Chair John D. Hofmeister and Shell Trading Vice President Robert W. Pease were visiting San Diego to tout the use of unconventional and renewable energy supplies.

Hofmeister addressed a City Club/Downtown San Diego Partnership luncheon yesterday.

“The industry needs to get its story better told,” Hofmeister said in an interview. “We can achieve energy security in the country . . . through the whole range of alternatives that are out there.”

The public also needs to play a role in diminishing the country's reliance on costly fuel sources, Hofmeister said.

“We need a change in our culture around conserving energy,” he said.

Among unconventional sources that hold promise are the extraction of oil from oil sands and shales and gases from coal bed methane and shale gas.

Solar power plants and wind farms should be developed to decrease the cost of electricity, Hofmeister said, and greater reliance on ethanol and hydrogen to fuel cars, trucks, buses and other vehicles would offset the high price of gasoline.

Shell has initiated ventures to develop all these sources, including the establishment of a “hydrogen corridor” of stations reaching from Northern to Southern California.

“We're pushing the technology as quickly as we can,” Hofmeister said.

The corporation's current investment to develop the new energy and fuel resources only amounts to hundreds of millions of dollars, he conceded, while Shell's spending on conventional fuel and energy resources totals $19 billion annually.

Shell is one of few energy firms putting such an emphasis on developing unconventional and renewable fuel supplies, said Jeremy Martin, director of the energy program at the Institute of the Americas at UC San Diego.

“I don't see a lot of companies doing this,” Martin, said. “It's based on the fact that the price of oil hadn't been high enough that they could be economically sincere about undertaking these kinds of projects.”