Basking in a series of financial successes, Sempra Energy COO Donald Felsinger said his company cashed in on the big bet it made five years ago on natural gas strategy. Speaking last Monday at Bank of America's annual investment conference in San Francisco, Felsinger said Sempra correctly projected that North American production reached its peak and then it invested accordingly in liquefied natural gas (LNG) terminals, pipelines and storage.
"Early on we developed a view of natural gas supplies and prices that seems today to be generally accepted," said Felsinger, who credited the company's own research and analysis with helping the nonutility side of Sempra "position itself to capture opportunities it saw emerging from the changing natural gas marketplace."
As a result, Sempra today is in the midst of several major gas initiatives that hold the promise of paying off big: (1) development of LNG receipt terminals on the Gulf Coast and on the West Coast; (2) investing in coal-fired power plants as a hedge against higher, more volatile wholesale natural gas prices; and (3) starting a pipeline and storage business that is evolving from a regional to a national orientation.
Besides resolving some onerous litigation from California's energy crisis four years ago, Sempra has two remaining challenges, Felsinger said. First it has set a high priority in wrapping up supply contracts for the majority of its capacity at two Gulf-based LNG import terminals. And secondly, it needs to find new opportunities and ways to capitalize on that LNG supply in the constantly evolving natural gas market.
In the meantime, the company is pursuing $2.5 billion in investments in three LNG facilities: Costa Azul in North Baja in Mexico; Cameron, along the Louisiana Gulf Coast; and Port Arthur in Texas, which still requires federal permits to proceed with construction.
More recently, the company announced a partnership effort with Kinder Morgan to build an enterprising 1,500-mile, $3 billion long-distance natural gas interstate pipeline to carry Rocky Mountain supplies to the Northeast United States.
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