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Sempra Unconcerned About Lack of LNG Trade in 3Q

Despite short- and long-term contracts for liquefied natural gas (LNG) supplies at its newest of two North American LNG terminals, San Diego-based Sempra Energy remains unconcerned about the lack of any commercial shipments through its new Cameron, LA, facility in the third quarter, executives said last Monday.

During an earnings conference call Nov. 9, Sempra CEO Donald Felsinger reported that profits were up quarter-over-quarter and the prospects for continued growth in all of its businesses remain good (see related story).

Although at both Cameron and its North Baja California LNG terminal in Mexico Sempra has long-term contracts, so far this year Sempra LNG operations continued to report losses for the first nine months, albeit smaller than the losses in the same nine-months last year ($19 million for this past nine months, compared with $33 million in the same period last year). For the immediate past quarter, Sempra LNG broke even, compared to a $4 million loss in the third quarter in 2008.

More LNG is headed this way, just not to Sempra's facilities. On Thursday Ras Laffan LNG Co., the joint venture of the Qatar national petroleum company and ExxonMobil Corp., shipped its first LNG cargo to South America with a spot sale to Chile's BG LNG Trading LLC, according to press reports. Meanwhile, Sempra Energy's new Cameron facility still awaits its first of 10 spot shipments from Qatar under a short-term deal inked earlier this year.

Felsinger said the LNG business, now truly global in scope, is not so much driven around volumes but rather contracts.

"In the third quarter we did not have any volumes come in under the RasGas contract," said President Neal Schmale, responding to a question about the short-term, 10-shipment deal that Sempra announced in June with the Qatar government-backed LNG supply company.

Quoting a RasGas official who said South America is a growing LNG market, Bloomberg reported last week that a cargo loaded in mid-October in Qatar had arrived at Quintero Bay in Chile.

Bloomberg reported that Qatar plans to increase its LNG production capacity from 54 to 77 million tons per year by next year, and that it recently diverted 5 million tons of supplies to China from the United States at the opening of the new RasGas production unit in October. In other reports, Qatar officials were quoted as saying they have no plans for any shipments to the United States in the near future.

At the time it signed the Qatar deal, Sempra said shipments were expected to begin last August and run through 2010. Sempra would not place a dollar value on the contract, but Sempra LNG CEO Darcel Hulse expressed satisfaction in having the world's biggest LNG supplier, Qatar, choose to have Sempra and its Cameron facility "help them place cargoes in the U.S. marketplace during this period of time when we find ourselves in a recession and are bringing online the largest new supplies of LNG in the history of LNG," Hulse said.

"Over the course of the [18-month deal] we would fully expect to have volumes into Cameron, but in terms of discussing the near-term potential [for shipments] obviously for contractual reasons, we can't talk about exactly what is going on at any particular point in time," Schmale said. "I would reiterate the point Don [Felsinger] made that these businesses are largely dependent and well served by the long-term contracts we entered into."

Among the 56 LNG shipments under short-term contracts coming to U.S.-based terminals in the first nine months this year, none came from Qatar, and most (34) came from Trinidad. There were only three other sources of the shipments to the United States, according to the latest National Import/Export Report from the U.S. Department of Energy (DOE): Egypt, Norway and Nigeria.

Among 80 LNG shipments under long-term contracts, the same four nations were the sources of the supplies. In addition, another nine shipments, all from Trinidad, were made to the electric utility in Puerto Rico through September, according to the DOE report.

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