San Diego-based Sempra Energy indicated at the start of this month that it is on target to start first shipments of liquefied natural gas (LNG) in early 2008 at its Costa Azul facility on the Pacific Coast of North Baja California, Mexico, and in 2009 at its Cameron facility on the Louisiana Gulf Coast. CEO Donald Felsinger gave the latest status report during a third quarter earnings conference call Nov. 1, noting the Baja California plant will add a $125 million nitrogen injection unit at the request of one of the terminal's shippers.

"Having a nitrogen facility will allow the plant to accept supplies of gas from a wider range of locations from around the world, and process the gas to North American standards," Felsinger told financial analysts on the earnings call that reported third quarter net income of $330 million, or $1.24/diluted share, compared with $332 million, or $1.27/share, for the same period in 2006 when certain one-time asset sale proceeds were excluded ($211 million, or 80 cents/share).

Sempra will develop, own and operate the nitrogen facility in exchange for an added return on its initial investment at Costa Azul. Test shipments of LNG have now been secured for the facility 60 miles south of the U.S.-Mexico border, Felsinger said, noting those shipments will come in the first two months next year. The LNG terminal is now 90% complete (and Cameron is 60% complete), he said.

Sempra also obtained the last of its needed regulatory approvals for expanding the Costa Azul capacity by adding up to another 1 Bcf, but it has no immediate plans (contracts) to expand, Felsinger said. "We are in a competitive position to expand our facility when there is a sufficient market to do so."

The expansion of the North Baja international gas pipeline between the California-Arizona border and the area around the LNG site is also on track and 80% complete, according to Felsinger. This work includes a 45-mile link from the LNG plant to where the line terminates at some gas-fired electric generation plants at Rosarito Beach, closer to the international border. There is also ongoing work to make the pipeline flow in either direction, facilitating flows into California, Arizona and other western states eventually.

On the financial front, Sempra acknowledged that its regulatory approvals on its proposed partnership with units of the Royal Bank of Scotland (RBS) have been slowed by a couple of months, with the new target date for closure being in January. "The recent liquidity concerns in the financial markets highlight the importance of this joint venture form Sempra Energy," Felsinger said. "Although we were financially prepared for the recent credit crunch, the crisis reinforces the value of having a sound financial partnership like the one with RBS."

Sempra utilities hit $186 million in net income, compared with $131 million for the same period last year; commodities recorded $87 million in profits, compared with $105 million in the third quarter of 2006; generation reported $58 million of profits for the third quarter, compared with $54 million (excluding $211 million in asset sales) for the period in 2006; and pipelines/storage churned out $17 million, compared with $19 million in the third quarter in 2006.

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