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Sempra Energy Unit Inks MOU with Russian Gazprom for N. American LNG Market

In a potential deal that would involve its energy trading and North American liquefied natural gas (LNG) operations, Sempra Energy's global unit announced last week that it signed a memorandum of understanding (MOU) in Moscow with Russia's Gazprom, the largest natural gas producing company in the world, to "cooperate in the delivery and associated marketing of LNG in North America." No financial value, terms or volumes of gas were disclosed.

Sempra COO Donald Felsinger and Gazprom Chairman Alexey Miller signed the MOU on Monday -- a nonbinding agreement characterized by the two parties as contemplating "importing Russian LNG into Sempra LNG's receipt terminals under development in North America and marketing of the natural gas through an arrangement with [Sempra's trading arm] Sempra Commodities."

Characterizing the MOU as a means of facilitating the movement of Russia's vast natural gas supplies to the United States, Felsinger said the prospective deal represented "a strategic alliance" for the two companies. Gazprom's Miller called the MOU "an important step" because Sempra Global is what he called "well positioned as a gas trading and transportation company" in the United States and has no intention of entering the gas production business outside the United States. "They (Sempra) make an ideal partner for us," he said in a joint announcement.

Gazprom, based in Moscow, indicated that it plans to begin natural gas exports to the United States this year, and the company will begin drilling one of the world's largest offshore fields -- Shtokman -- in the Barents Sea where there are nearly 3 trillion-cubic-meters (Tcm) of reserves. Exports from that field are expected to begin in 2010-11, the companies said in their joint announcement. Gazprom sold 540 Bcm of gas last year and has served the European market for 30 years.

Sempra LNG has three new LNG receiving terminals under development -- Energia Costa Azul along the Pacific Coast of North Baja in Mexico, Cameron LNG terminal near Lake Charles, LA, and Port Arthur LNG, near Port Arthur, TX. The first two are expected to be operational in 2008 and Port Arthur is slated for 2009 start-up.

As a leading participant in the marketing and trading of physical and financial commodity energy and metals products, Sempra Commodities has become one of the largest marketers of natural gas in North America.

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