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San Diego-based Sempra Energy's liquefied natural gas (LNG) unit said Tuesday it has signed commercial development agreements with Mitsubishi Corp. and Mitsui & Co. Ltd. to develop and construct Sempra's proposed $6 billion liquefaction facilities at its Cameron LNG import terminal site in Hackberry, LA. Under the deal, Sempra would negotiate tolling agreements with the two Japanese giants for two-thirds of the facility's projected capacity.
Sempra said its completed facility would include three liquefaction trains with a total export capability of 12 million metric tons per year of LNG, or the equivalent of 1.7 Bcf/d. Construction is expected to start late next year with operations beginning in late 2016.
The liquefaction facility will use Cameron LNG's existing facilities, including two marine berths capable of accommodating Q-Flex sized LNG ships, three LNG storage tanks of 480,000 cubic meters and vaporization capability for regasification services of 1.5 Bcf/d. Sempra said the majority of the new facilities $6 billion price tag will be project financed with the rest coming from the project partners in a joint-venture arrangement.
The commercial development agreements announced Tuesday bind the parties to fund all development expenses, including design, permitting and engineering, along with negotiating 20-year tolling agreements based on agreed-upon terms outlined in the commercial development agreements. Each tolling agreement would be for 4 million metric tons per year. The remaining 4 million metric tons per year will be negotiated with other parties, Sempra said.
Sempra's announcement comes a day after the Federal Energy Regulatory Commission (FERC) approved a proposal by Cheniere Energy units Sabine Pass Liquefaction LLC and Sabine Pass LNG LP to site, construct and operate facilities to liquefy domestic natural gas for export to markets worldwide (see Daily GPI, April 17). Sempra still needs to obtain FERC and final U.S. Department of Energy (DOE) approvals for its export plans.
At a financial analysts' conference hosted by the company in late March, Sempra COO Mark Snell talked about Sempra seeking "commercial development agreements" with customer-partners by the end of the second quarter. Snell described the partners as committing to the Cameron facility and to not negotiating with other terminals, along with funding pre-filing costs on an equal basis with Sempra and eventually signing 20-year tolling agreements with the facility (see Daily GPI, March 30).
In January Sempra's Cameron facility gained DOE approval to export up to 12 million metric tons per year of domestically produced LNG to all current and future free trade agreement nations (see Daily GPI, Jan. 23). Authorization to export LNG to countries with which the United States does not have a free trade agreement is pending review by DOE, Sempra said.
Cameron LNG has an engineering service contract with Foster Wheeler AG for project development, front-end engineering design to support FERC applications, and support for engineering/construction contracting. Additionally, the project has retained law firm Morgan Lewis & Bockius LLP as legal counsel on the liquefaction project, and The Royal Bank of Scotland as its financial advisor.
Snell said the agreements with Mitsubishi and Mitsui "represent a significant step" in the liquefaction facility's development as a player in the budding international gas market for U.S.-based supplies.
With the added component of the tolling agreements, Sempra LNG President Octavio Simoes said both Mitsubishi and Mitsui have objectives to develop their own North American gas resources for delivery as LNG in the global gas market.
With the shutting down of some nuclear power capability, Japan's need for LNG has increased significantly, Snell told analysts at the Sempra conference in San Diego last month. "They really are looking for a new source of supply and are going to be turning ever more to the United States for this gas," he said at the time.
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