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FERC OK's Expansion of Sempra Cameron LNG Project

San Diego-based Sempra Energy got the organic boost it has been coveting for its gas portfolio when FERC late last week authorized the company's proposed expansion of its Cameron liquefied natural gas (LNG) export project in Louisiana, the first phase of which is more than 40% complete.

The federal approval to build added LNG export capacity within the existing site on the west side of the Calcasieu Ship Channel covers a fifth 160,000-cubic meter LNG storage tank and two additional liquefaction trains (4 and 5), each train with nearly 5 million metric tonnes-per-annum (mtpa) of capacity, along with other related equipment and facilities with the capacity to export an added 515 Bcf of LNG annually.

In its environmental assessment filed with the Federal Energy Regulatory Commission (FERC) last September (see Daily GPI, Sept. 8, 2015), Sempra said the Cameron expansion would add 9.97 million mtpa of production capacity, or the equivalent of 1.41 Bcf/d, pushing Cameron LNG's overall export capacity to 24.92 million mtpa, or 3.53 Bcf/d.

On an earnings conference call last week, Sempra CEO Debra Reed cited the Cameron expansion as one of the company's major organic growth opportunities that could spur other growth in the pipeline and storage sector. "We would anticipate having agreements in place [for the added Cameron volumes] by the end of the year based on conversations we have been having with the parties now," Reed said.

"This is a good growth project for us, but we also think when you have such huge demand for gas [more than 3.5 Bcf/d], there will be new opportunities to develop pipelines and storage to serve those loads as another great opportunity for us."

In giving its green light to the project, FERC said the expansion will result in "minimal environmental impacts and can be constructed and operated safety." It called expansion "not inconsistent with the public interest."

Reed and senior Sempra executives outlined  the expansion 18 months ago, calling for adding trains 4 and 5 if there was enough support from the market and regulators (see Daily GPI, Nov. 5, 2014). At the same time, the executives said Sempra will also consider whether to develop its 2,900-acre, three-mile-long waterfront property in Port Arthur, TX, for a deepwater port that could be used to export LNG and/or natural gas liquids, along with whether to convert to an export facility the Energia Costa Azul (ECA) LNG receiving terminal on the Pacific Coast in Baja California, Mexico.

At the conference call last Wednesday, President Mark Snell reiterated his long-held contention that the Cameron expansion offers what he thinks is the lowest-priced North American LNG option for the second phase of U.S. LNG exports. "That is why we continue to have pretty good interest from people looking at securing this [low-cost] option early, maybe even in advance of when world demand will require it," Snell said.

Snell said the project should be wrapped up by the end of this year, and the financing arrangements will follow the first part of 2017.

However, Reed acknowledged that the global LNG market has slowed, and today's market is "a very challenging environment in which to get agreements signed, so even if the agreements are not signed until January or February next year, I'll still be happy."

Cameron's ongoing first phase construction is 43% complete and "going very well," Reed said.  "We're on schedule, expecting train 1 to come online in March of 2018, with trains 2 and 3 to following in July and November, respectively, that year."

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