The Daley Note: June 9, 2023
TC Energy (TRP) has received regulatory approval to place the North Baja Xpress expansion into service, adding new gas delivery to the Southwest and Mexico.
The Federal Energy Regulatory Commission (FERC) on May 31 granted TRP’s request to place the North Baja Express project into service. The project upgrades the Ehrenberg compressor station in La Paz County, AZ, boosting pipeline capacity to the US/Mexico border by 495 MMcf/d (see figure).
The project is an important upgrade to the supply chain required to eventually ship LNG from Mexico’s Pacific coast. North Baja Pipeline runs 80 miles from Arizona and California to the Mexico border, where it connects to another line linked to Sempra Energy’s (SRE) Energia Costa Azul LNG import terminal on the Baja California. SRE is adding liquefaction and export capability to the Costa Azul facility.
The bi-directional North Baja line can ship up to 600 MMcf/d northbound and 500 MMcf/d southbound to Mexico. Currently, North Baja moves ~380 MMcf/d from the El Paso Natural Gas system, nearly all of which flows to Mexico.
East Daley expects the additional capacity will eventually support LNG exports from Costa Azul, supplying up to ~430 MMcf/d for liquefaction. The Costa Azul expansion is part of a larger wave of LNG projects planned in North America that we expect to significantly boost gas demand post-2025. However, SRE is still constructing the Costa Azul expansion and targeting start-up in 3Q25, raising the question of how much gas will flow through the North Baja pipeline in the meantime.
The El Paso system interconnects with North Baja Pipeline in Ehrenberg, AZ, where it also supplies an average 745 MMcf/d (50% utilization) to the Southern California Gas distribution system, peaking at over 1 Bcf/d. It is unlikely that the North Baja pipeline would pull gas from Southern California given the premium paid on the West Coast. But when the Costa Azul expansion comes online, likely supplied under firm contracts, either California or Mexico will pay a premium. - Oren Pilant Tickers: SRE, TRP.
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