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Sempra Snags Short-Term Qatar LNG Deal

Getting some much-needed start-up cargoes for its new Gulf of Mexico liquefied natural gas (LNG) terminal, San Diego-based Sempra Energy announced last Monday it has signed a "flexible" short-term agreement for up to 50 LNG shipments from Qatar through the end of next year. Cargoes equivalent to about 4.8 Bcf each will be shipped to Sempra LNG's Cameron facility near Lake Charles, LA, starting this August.

Sempra said construction of the Cameron LNG receiving terminal is nearing completion and it is expected to begin commercial operations in July. With only 40% of its capacity under contract, the Qatar contract will allow Sempra to make fuller use of the facility in these unsettling economic times.

The agreement was signed with an affiliate of RasGas Co. Ltd., a Qatari joint stock company established in 2001 by Qatar Petroleum and ExxonMobil, which are 70% and 30% shareholders, respectively. Sempra LNG officials told NGI Monday they consider this deal with the world's largest LNG marketer a major breakthrough for the Cameron facility.

"This is an opportunity to work with the world's largest supplier of LNG," said Darcel Hulse, Sempra LNG CEO. "They have chosen us to help them place cargoes in the U.S. marketplace during this period of time when we find ourselves in a recession and are bringing on line the largest new supplies of LNG in the history of LNG. We feel very fortunate to have been selected to work with them. It is a relationship we have worked on for many years to build."

This deal is somewhat of a model for what is likely to be structured in the current global market for LNG, Hulse said. "I think right now with so many uncertainties and price variations across the board, people need some flexibility until things settle down," he said. "That is what we worked on and that is what we structured. It works well for them and for us."

Shipments are expected to start Aug. 1 and run through 2010, said Sempra, which refused to place a dollar value on the contract.

Four years ago Sempra signed a 20-year deal to provide Italy's Eni S.p.A, the global oil and gas production company, with approximately 40% of the Cameron facility's 1.5 Bcf/d capacity. As a result of the agreement, Sempra LNG eventually began construction of the import terminal, and the Eni shipments kick in next month after Sempra receives two commissioning cargoes at Cameron this month.

Just last month on a conference call with financial analysts, Sempra CEO Don Felsinger predicted that spot cargo deals would dominate LNG trade in the next few years. Felsinger reasoned that with the substantial added global capacity and decreased demand for LNG supplies, spot cargoes would likely dominate worldwide gas markets in the next two years.

Hulse cited the new RasGas deal as an affirmation of the underlying value of his company's Gulf Coast LNG assets and marketing capabilities. "This short-term agreement allows us to utilize the remaining capacity at our new Louisiana terminal more fully, while expanding our gas marketing opportunities," Hulse said. "It is an ideal fit for them and ideal for us."

Sempra stresses the location of Cameron in its marketing efforts. The terminal is near Henry Hub and the Gulf of Mexico, along the Calcasieu Ship Channel about 15 miles south of Lake Charles. This is Sempra's second LNG facility in North America to come on-line in the past 18 months.

Energia Costa Azul, located in North Baja California, Mexico, began commercial operations last year as the only LNG facility on the West Coast. Unlike Cameron, the Baja facility's capacity is fully subscribed, although only a few spot cargoes have gone through the terminal to date.

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