Citing the U.S. domestic natural gas boom fueled by shale plays, San Diego-based Sempra Energy executives said Thursday the company's liquefied natural gas (LNG) unit will soon file with the U.S. Department of Energy (DOE) for an export permit at the Sempra LNG import terminal at Cameron, LA.
Sempra is in discussions with potential exporters of LNG, said CEO Debra Reed. "Given the dramatic rise in North American natural gas production from shale resources and the disparity in gas prices between North America and both Asia and European markets, several liquefaction projects have now been proposed to export LNG to foreign markets," Reed said. "We have strong interest from large, creditworthy counterparties who want to procure liquefaction services through Cameron LNG on long-term, 20-year contracts."
With this "significant interest," Reed said Sempra will submit its filing soon to DOE to build export capability at Cameron, which currently is operated at one-third of its total import capacity. She made it clear Sempra will only pursue this option with at least one long-term contract in hand for significant volumes. The idea is to "more fully utilize our infrastructure and minimize our investment risks," she said.
Reed said the "stature and enthusiasm" of the potential contracting parties makes LNG exporting a "realistic objective" for Sempra.
Reed and Sempra President Mark Snell offered a little more detail on the Cameron plans in response to several analysts' questions, including a ballpark price tag of $1-2 billion for the export facilities and a regulatory and construction time frame of three to five years.
Reed said while the discussions with potential exporters are positive, they are still in the early stages. "The good news here is that we have a real opportunity to take the Cameron facility and start using it to its maximum potential," said Snell.
"We're talking to some large counterparties here, so they could become one of our partners on this. At the end of the day, however, we really haven't spelled out internally how we would fund this. It wouldn't necessarily be our capital." Snell said the export business in the United States is "just coming into its own right now," and Sempra expects to know in the next year how this will move forward.
Snell said DOE and Federal Energy Regulatory Commission permits are the two biggest regulatory hurdles, but there are a lot of building and environmental permits required also.
"It is fairly far down the line, and our purpose in highlighting it today is because of the swirl of activity around [U.S. liquefaction development] and the fact that we are going to make a public filing to DOE soon," Snell said.
A unit of global LNG player BG Group recently agreed to buy domestic LNG from Cheniere Energy Partners LP's Sabine Pass Liquefaction LLC, marking the first sales contract for the company's U.S. Gulf Coast facility and the first for export of LNG from the Lower 48 (see Daily GPI, Oct. 27).
Sempra reported increased quarter-over-quarter profits for all of the Sempra business segments. For 3Q, earnings were $296 million, or $1.22/share, compared with $131 million, or 53 cents/share, for the same period in 2010.
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