The Case for West Coast North American LNG Exports
North American West Coast LNG shipments will have a significant time and cost advantage over Gulf Coast options that depend on passage through the Panama Canal. To meet Asian LNG demand, Gulf Coast producers would theoretically need to send two to three ships a day through the Canal; however, transits are currently capped at seven a day total, and LNG ships are bound by logistical restrictions that have kept that to about one LNG ship a day. Even if that capacity was to be expanded, East Asian governments and LNG purchasers consider the Panama Canal a potential logistical chokepoint and a political risk.
The greatest challenge to U.S. natural gas resources in many regions is the lack of adequate takeaway pipeline capacity and export infrastructure. This is an opportunity for Western and Mid-Continent natural gas because the existing localized infrastructure is ahead of other regions and the cost to market is very competitive.
The key is getting pipeline connections in place to take it west for transport to markets in Asia. Jordan Cove, located in Oregon’s Coos Bay, or Costa Azul, located near Ensenada, Baja California, are the envisioned LNG terminals on the West Coast that will be capable of exporting to Asian markets.
Natural gas supplies to the LNG terminal will come from the U.S. Rockies via the Ruby Pipeline, which terminates at Malin hub in southern Oregon. Natural gas from Malin will feed into the Pacific Connector Gas Pipeline, which will go directly to Jordan Cove. The Pacific Connector Gas Pipeline project, if completed, will become the best-positioned terminal in the U.S. to serve markets in Asia because of its shorter shipping distance to Asia compared to other terminals.
Exports through Mexico’s West Coast
The inability to obtain an LNG export permit in California is causing companies to look at the Northwest Baja region of Mexico. Pipelines do exist that could connect gas produced in the Rocky Mountain Region to this area; however, most of the activity has been created by companies focused on Permian Basin gas production. In November 2018, Sempra Energy and Total S.A. announced a Memorandum of Understanding that provides the framework for cooperation in the development of North American LNG export projects including the Energía Costa Azul (ECA) liquefaction-export project in Baja California, Mexico. The MOU between these two energy giants will allow for the development of export capacity on the Pacific Coast of Mexico, which will benefit from synergies with existing infrastructure and a significant shipping cost advantage for customers in Asia.