San Diego-based Sempra Energy executives remain confident that the Energía Costa Azul (ECA) liquefied natural gas (LNG) export project in Mexico’s Baja California will go ahead as planned despite the need to push back a final investment decision into the second quarter.

“We're confident in the long-term value the ECA project has to our shareholders and our customers,” COO Lisa Glatch said during an investor day presentation. “With its unique position on the North American west coast, ECA LNG reduces the shipping times and cost to key markets in Asia. And I might add that interest in an expansion phase remains very high.”

The proposed two-phase ECA liquefaction project, a joint venture between Sempra subsidiaries Infraestructura Energética Nova (IEnova) and Sempra LNG, would be built adjacent to Sempra’s existing ECA LNG receipt terminal near the city of Ensenada.

In late 2018, ECA signed heads of agreement (HOA) with Total SA, Mitsui & Co. Ltd. and Tokyo Gas Co. Ltd. to take capacity from Phase 1 of the proposed project. The three companies each potentially could purchase 0.8 million metric tons/year (mmty) from Phase 1.

IEnova CEO Tania Ortiz said a planned gross investment of about $1.9 billion for the project is factored into Sempra’s financial outlook.

She said the project would allow Sempra to “extend the life of our existing assets beyond 2028, when the current contracts expire and IEnova would develop alone a new pipeline to deliver gas to the facility, with an expected investment of $400 million, which is also included in Sempra's consolidated capital plan.”

Last year, ECA received U.S. Department of Energy authorizations allowing Sempra to export U.S.-produced natural gas to Mexico and then re-export it globally. The project still requires an export permit from the Mexican government, but the Sempra executives said they expected to receive it soon.

President Justin Bird sees Sempra signing sale and purchase agreements for ECA in the “next few weeks.”

Despite uncertainty in global LNG markets, with slumping energy demand, cargoes being turned away in China, India and possibly Europe, and prices getting hammered, executives were confident in the longer term viability of LNG.

CEO Jeffrey Martin said “what you're seeing now in the LNG space is a strong trend line toward a convergence of a global, not a regional natural gas price and LNG can play a big part of that.”

He added that “these large markets are subject to large cycles and currently the spot market is poor for a variety of reasons, including the current economic state. But we do think fundamentally, if you think about the large energy transition ongoing and the need to give the developing world choices of lower carbon fuels, the LNG business will become bigger, it will become more important and the role that we want to play is not one that is exposed to the commodity side of it. It's one that builds the essential infrastructure, and enables that marketplace.”

Moreover, Martin sees Mexico becoming even more important in a future beyond the Covid-19 outbreak.

“The longer-term picture probably gets even better for us in Mexico. I think there's going to be some short-term disruptions, but Mexico is the largest economic trading partner to the United States today. It's a huge buyer of refined product, it's our No. 1 natural gas trading partner. And as you think about what takes place when the current environment changes, and it will change at some point, I would expect to see supply chains to be revised, I would expect to see…the growing importance of Canada and Mexico and the United States being integrated.

“And I think the key issue is the continued diversification of Mexico's economy and that's one of the things I think we're bullish on long-term.”

ECA isn’t the only Mexico export project looking to use U.S. gas to feed exports to Asian markets. In January, developer Mexico Pacific Ltd. LLC brought on former Cheniere Energy Inc. executive Douglas Shanda to be CEO in an apparent attempt to expedite the planned 12 mmty Puerto Libertad project.

The Mexico projects, which are seen as advantageous because vessels can reach Asian markets without having to traverse the Panama Canal, are in line with longer term forecasts of increasing global demand for LNG.