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Sempra is seeing “a dramatic increase in the market interest” for its liquefied natural gas (LNG) export projects under development on Mexico’s Pacific Coast and the U.S. Gulf Coast, according to Sempra Infrastructure CEO Justin Bird.
Formed in 2021, Sempra Infrastructure is tasked with developing, building and operating Sempra’s natural gas liquefaction, pipeline and storage projects in North America.
The LNG projects include Energía Costa Azul (ECA) Phase 1 and Vista Pacifico on Mexico’s Pacific Coast, and the Cameron Phase 2 expansion in Louisiana.
Sempra executives discussed the state of the projects and the global LNG market during Sempra’s fourth-quarter earnings call.
Sempra Expects ECA Phase 1 to achieve first LNG by end-2024, while Vista Pacifico and Cameron Phase 2 have yet to reach final investment decision (FID).
For the Cameron expansion, Sempra is making “great progress” and targeting FID in “the first portion of 2023,” Bird said. The project is slated to add about 6.75 million metric tons/year (mmty) of capacity to the terminal’s current 12 mmty. The operating Cameron Phase 1 terminal, meanwhile, hit record production in 4Q2021, “and we’re working with our customers to accelerate the debottlenecking” at the site, Bird said.
Sempra expects the debottlenecking efforts to add another 1 mmty of production capability at Cameron, and for this to be complete prior to the full additional train at Phase 2, Bird said.
For Vista Pacifico, Sempra is “actively marketing” about 10 mmty of offtake, “and we are seeing extremely high levels of interest,” Bird said. “So make no mistake, we’re working with our partners and customers to get them supply as soon as possible. I wish we could give them more now, but as many of you know the projects take time to develop, permit and build.”
Bird shared the microphone with Sempra CEO Jeffrey Martin.
Martin said that Mexico, in the wake of its 2013-2014 constitutional energy reform, has “essentially overbuilt” its pipeline network, “with a view toward building a lot more natural gas-fired generation to replace a lot of their oil fired plants or their older plants.”
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As a result, “Some of that pipeline capacity is unused.”
State power utility Comisión Federal de Electricidad (CFE) has anchored the pipeline buildout in order to ensure sufficient supply of U.S. gas for its growing gas-fired generation fleet.
Sempra and CFE this year signed a nonbinding memorandum of understanding (MOU) to develop Vista Pacifico and a separate LNG regasification plant in La Paz, Baja California Sur, and to restore operations on the Guaymas-El Oro segment of Sempra’s Sonora pipeline system.
Martin explained that “our partnership with CFE is designed to basically utilize some of their pipeline system to support the Vista Pacifico project, which reduces the cost that they’re bearing for that capacity.”
Martin said Sempra sees growth opportunities in Baja California and Baja California Sur, which “is literally disconnected from a gas and electrical standpoint from mainland Mexico.”
He said, “we think there will be continued opportunities there and in the future for pipelines to be built” to improve connectivity.
Sempra “advanced major construction” on ECA Phase 1 during the fourth quarter, management said, adding that the project remains on time and on budget. Sempra Infrastructure has 15 mmty of LNG projects in operation or under construction.
If sanctioned, Vista Pacifico and Camperon Phase 2 would have a combined projected capacity of over 10 mmty for customers in the Atlantic and Pacific Basins.
‘Uncharted’ Territory
Martin pointed to recent market turmoil and high gas prices as evidence of the global appetite for LNG.
He said that “we’re really in uncharted territories I think in the global energy markets,” citing surging Brent oil prices and European natural gas futures. Front-month Brent oil and Dutch Title Transfer Facility natural gas prices finished above $100/bbl and $32/MMBtu, respectively, on Monday.
He also noted low European natural gas storage levels, which were about 28% below the five-year historical average as of Feb. 26. “So it is a really a challenging environment in Europe, but if there’s one takeaway – and we’re seeing this in all of our conversations – that conversation around security of supply and security of market is becoming more important.
“People today…want to make sure that they can enter into contracts where there is a rule of law, and I think over the next mid-term and long-term, you’re going to see the United States really flex its muscle in the LNG space…”
Sempra reported net income of $712 million ($1.90/share) for the fourth quarter, versus $432 million ($1.43) in the year-earlier period. Full-year net income of $1.46 billion ($4.03/share) in 2021, down from $4.11 billion ($12.93) in 2020.
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