San Diego-based Sempra Energy’s vast liquefied natural gas (LNG) stake in North America looks like a pot of gold with more than 2 Bcf/d of LNG capacity sold to LNG suppliers at two of its three permitted terminals that are under construction and set to begin commercial operations next year.

While not all of its upside potential is assured at this point, most of the downside is covered, according to Sempra LNG CEO Darcel Hulse.

“We are a very large natural gas marketer in North America,” Hulse said during an interview Tuesday with NGI. “For those interested in coming here with their gas, we can offer marketing services; we’re not just a terminal builder, so we can do many things for those who don’t have a presence in this marketplace, but want to bring gas in.”

Although Hulse admits the unseasonably mild winter and abundance of gas in storage are currently masking the need for overseas gas supplies, he is nonetheless an LNG believer. Ultimately, demand will attract the supply to keep Sempra’s three terminals — Energy Costa Azul in North Baja California, Mexico; Cameron LNG in Cameron, LA; and Port Arthur LNG in Port Arthur, TX — and their 8 Bcf/d of capacity humming.

Given the inevitable decline of domestic supplies, the question becomes “in the pricing forecast when is LNG cheaper than our marginal cost of production,” Hulse said. “The trend is that over time, there will be greater need for LNG, and it is a question of timing, and putting these projects together is not an easy task. It requires a great deal of time to put these together. Delays anywhere along the development chain can cause delays in the overall development [as is currently happening with new liquefaction capacity in producing nations].”

Sempra’s first project at Costa Azul along the Pacific Coast of North Baja about 60 miles south of the U.S. border is an example of how Sempra has its bets covered to remain whole even if there are slips in the LNG deliveries. It has a contract with Shell for half the terminal’s initial 1 Bcf/d capacity, and Sempra also has contracts for up to 500 MMcf/d equivalent of LNG from Indonesia.

Whether or not Shell gets its initial supplies to the Baja terminal in early 2008, the meter begins running for Sempra, which collects capacity payments for up to 500 MMcf/d, Hulse said. After some initial start-up shipments, the long-term, 20-year Indonesian supplies will not come until late 2008 or early 2009, he said, meaning that between now and early next year, Sempra will be seeking so-called “bridge” or short-term supplies from any one of a number of Pacific basin suppliers.

“The Tangguh Project [in Indonesia] really doesn’t come on line until late 2008 or early 2009, so there is an opportunity for us to receive additional cargoes during a window of seven or eight months to a year,” Hulse said.”So we have some flexibility and we’re actively in the marketplace looking for short-term cargoes during that time. We call them bridge cargoes.”

Hulse said Sempra most likely will not announce these short-term deals, compared to long-term, multi-billion-dollar LNG contracts that are obviously material events and must be announced under financial reporting regulations.

For the Cameron terminal in Louisiana, which will finish construction after Costa Azul, about 1.1 Bcf/d of the 1.5 Bcf/d initial capacity is under contract in deals with the Italian oil/gas giant Eni SpA (600 MMcf/d) and Merrill Lynch Commodities Inc. (500 MMcf/d).

“When you build these facilities you always have some mismatches,” Hulse said. “We built for the customers — Shell — and we’ve got our gas [from Indonesia] coming in on a firm basis later that year.”

While some of the supplies Sempra has contracted for directly are subject to be diverted to higher priced markets as the LNG trade becomes more of a liquid commodity, Hulse said the company has structured the deals so only portions of regular shipments could be diverted. Sempra would be able to cover all of its costs with firm loads that could not be taken elsewhere, he said.

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