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Sempra Signs Contract for Algerian LNG Imports for Cameron, LA,Terminal

Sempra Energy's liquefied natural gas (LNG) unit announced last week it has signed a "heads of agreement" (HOA) with Algeria's Sonatrach S.A., and is proceeding with "detailed negotiations" to bring Algerian LNG to the U.S. Gulf Coast. Sempra LNG said the negotiations include what it called "additional opportunities to market the gas in the United States." The deal is nonbinding, the company said.

The state-owned natural gas and oil refining company in Algeria, Sonatrach S.A., indicated through its CEO, Mohamed Meziane, that it views a potential deal with Sempra as a means of moving more Algerian gas to the U.S. market.

Sempra said the HOA anticipates culminating in a 20-year contract to import the equivalent of 250 MMcf/d to 500 MMcf/d of Algerian LNG through its Cameron LNG receipt terminal now under development near Lake Charles, LA. There is no target date for concluding the discussions and forging a full-blown deal, a San Diego-based Sempra spokesperson told NGI, and the company is not putting a projected dollar value on the prospective contract.

The HOA is "an important step," Sonatrach's Meziane said, calling Sempra "a leading natural gas trading and transportation company in the United States" that is "well qualified to help expand Sonatrach's presence there," which would indicate the Algerians are interested in some of Sempra's storage, pipeline and trading services beyond unloading and re-gasifying the shipments at Cameron.

Sempra LNG President Darcel Hulse called the preliminary deal "a potential strategic opportunity" between the Algerian energy giant and Sempra, which now bills itself as the "largest non-producing natural gas marketer in North America." All in all, Hulse said Sempra was "pleased to be working with one of the world's largest LNG exporters."

Sempra currently is developing three LNG receiving terminals -- Energia Costa Azul along the Pacific Coast of North Baja in Mexico (about 55 miles south of the U.S.-Mexico border), which is currently on schedule to begin receiving its first shipments in early 2008; Cameron, which is targeted to begin receiving shipments in late 2008; and a third facility still seeking permits near Port Arthur, TX. With timely federal permits, Port Arthur could be operational in 2009, Sempra said.

Costa Azul is now fully under construction with more than 600 workers on site and the first of the steel and concrete being put in place for two 17-story storage tanks, each containing more steel than the Eiffel Tower in Paris, according to Sempra. About 74 acres at the site of the $1 billion project have been graded.

"We're starting to see the reality of the vision we had years ago," said Hulse, as quoted by the San Diego Union-Tribune during a tour and subsequent report on the site.

Algeria is the second largest LNG exporter in the world with an installed capacity of 20 million tons (of gas shrunk to 1/600th of its gaseous volume by lowering its temperature to minus 260 degrees Fahrenheit). Algeria has 40 years of experience in the LNG industry, but it was also the site of an explosion that killed at least 27 people at one of its liquefaction facilities in January 2004.

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