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Cameron LNG Export Project Moving Forward, Says Sempra

With or without federal approval for liquefied natural gas (LNG) exports to nonfree trade agreement (FTA) nations, Sempra Energy is moving ahead with permit applications and engineering plans at its existing Cameron, LA, LNG import facility, Sempra executives said Tuesday. At the same time, the Sempra execs reiterated that the company is leaving the merchant power space.

CEO Debra Reed and COO Mark Snell in a conference call last week emphasized that they expect to move ahead with the Cameron project by 2014, regardless of the outcome of the pending study and permit approvals at the U.S. Department of Energy (DOE). Environmental review work, preliminary engineering and an application to build the export facilities, which would be filed with the Federal Energy Regulatory Commission (FERC), will be ready early next year.

Snell emphasized that Sempra would continue its export terminal plans even if it fails to get DOE non-FTA approval, but the "project will be smaller, of course, only one or two trains" in the liquefaction facilities. He said non-FTA approvals are still expected early next year.

"All of the feedback we have gotten from FERC and DOE indicates we can expect to get this project fully permitted," Snell said. "Even without the DOE permit, we would continue the project, but it would be smaller."

Reed described Sempra's overall 3Q2012 operating performance as "solid" and pointed to various upsides going forward, including the company's pursuit of $2 billion in natural gas transmission pipeline projects in Mexico. Major gas projects are foreseen in Mexico, beyond two contracts the company's Mexico unit won last month with the Comision Federal de Electricidad (see NGI, Oct. 29). "Obviously, Mexico is depending so much on switching from an oil-based economy to one based more on natural gas...Mexico is a real growth area for us."

Sempra earned $268 million ($1.09/share) in 3Q2012, compared with $289 million ($1.20) for the same period last year. The company took a one-time $60 million charge to write down its 25% stake in the Rockies Express Pipeline. With its natural gas and power unit showing red ink in the face of historically low prices, Sempra is in the process of exiting the merchant power sector where it has been selling off nonrenewable assets.

"We are on track to exit merchant generation," said Reed. She cited ongoing sales of assets, including the pending half-interest in the Mesquite, AZ, gas-fired plant to Phoenix-based Salt River Project. "We will continue to reduce our exposure to the merchant generation sector." Sempra will keep its growing interest in renewable-based generation (wind and solar), which has long-term power supply contracts and are not technically "merchant" generation, a spokesperson said. The baseload gas-fired plants have operated in the competitive purchase power markets without contracts for more than 10 years.

Despite the expiration of its 10-year power purchase agreement with the California Department of Water Resources, Reed said the company is finding some great growth opportunities elsewhere, including the Mexican gas transmission pipeline projects.

Reed was asked by an analyst if she is comfortable with what the company has still "out there" in the independent power sector. "We don't see merchant power as part of our long-term strategy..."Our desire is to exit merchant power at this time. We have been moving in that direction for some time."

She said Sempra has "about 1,450 MW still in the fleet and we are on a path to end our merchant generation involvement, but we're not in a big rush to sell the remaining assets. We want to take our time and find the deals that will bring the most value to our shareholders."

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