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Sempra Eyeing More U.S., Mexico LNG Exports

Additional North American liquefied natural gas (LNG) export projects are high on Sempra Energy's list of growth projects, COO Mark Snell said Thursday at the company's annual analysts meeting in San Diego.

Following CEO Debra Reed's opening remarks, which outlined the company's progress with plans to begin exporting LNG at Sempra's existing Cameron, LA, LNG import terminal site (see Daily GPI, March 5) on the Gulf of Mexico (GOM) and its "shale-driven strategy" to be a major gas infrastructure developer/operator, Snell said Sempra is looking at going significantly beyond the $6 billion, 12 million metric tons/year Cameron export project.

Among the additional export projects are:

  • Adding two production trains at Cameron;
  • Building smaller-scale export capabilities at the existing Energia Costa Azul (ECA) LNG receiving terminal site along the Pacific Coast of North Baja California in Mexico;
  • Building a greenfield LNG export facility on land Sempra owns at Port Arthur, TX; and
  • Looking at a second Mexican LNG export facility along the mainland West Coast in that nation.

"There are some really good reasons why ECA [in Mexico] should become an export facility," said Snell, adding that he gets frequent questions about the fully contracted import facility site. "It is the only import facility on the West Coast [of North America] so it has cost advantages as the only brownfield site for possible exports."

While acknowledging that the location's advantages over GOM facilities in reaching major Asian LNG markets will be reduced somewhat when the Panama Canal widening is completed allowing large LNG ships to go through it, Snell thinks a West Coast export facility in the long-term will still have a "small advantage" and in the near-term a large advantage.

"It is definitely something we are looking at," said Snell, adding that transforming the Mexico-based facility will require additional pipeline capacity for bringing in supplies and a change in Mexico's federal laws to allow a private venture to export gas. "We have a strong presence in Mexico, and we're recognized as a leader there, so I think we could get the legal authority relatively quickly."

The Costa Azul facility is fully contracted through 2028 with units of BP plc's Indonesian LNG operations and Royal Dutch Shell, and Snell said Sempra is in discussions with them on the prospects for creating an export capability at the site (see Daily GPI, Oct. 13, 2004). "They will have to decide that they want this facility to have the capability to export," Snell said. "They would have to decide if this is a good investment for them, and if they want to fund the construction of an export facility."

The land available in Baja California is not as extensive as Sempra's holdings on the Gulf, Snell said, so the export facility would probably be limited to two trains, and the additional pipeline capacity would add to the project's costs, but it would probably be offset by the economics of shipping from the West Coast location.

Snell said he thinks that by the end of the year Sempra could obtain the needed federal legal/regulatory changes to allow an export facility to be built. It would be an offshoot of the ongoing energy reforms being enacted by the Mexican Congress (see Daily GPI, Feb. 25), he said.

"How quickly this might happen, I can't really speculate on," Snell said. "But it is something we are definitely looking at."

Another LNG export possibility the company is pursuing longer range is centered on substantial acreage that Sempra owns in Port Arthur (see Daily GPI, Sept. 7, 2006), Snell said. "We have had several inquiries about building both land-based and floating liquefaction facilities, and we're doing technical studies to help decide which one would make the most sense," he said.

"It's a great waterway, it has great access, and we own lots and lots of land. We originally purchased this land a long time ago when we were thinking of this being a crude oil import terminal to provide another source for the refineries in the area. It has great promise [for LNG exports], but we don't have any contracts signed yet."

In addition, Snell said Sempra is exploring the opportunities for building another export terminal on the mainland West Coast of Mexico, which he said would be a good fit with the gas pipeline infrastructure projects Sempra is currently building in Mexico, and the spread of the Eagle Ford Shale south of the border from Texas is a potential rich supply source for exporting Mexican gas.

"I don't think any geologist actually believes the Eagle Ford supplies stop in Texas at the Mexican border. It is very, very likely that the shale will continue to be developed in Mexico. This has some interesting opportunities, and it is something we are focused on right now."

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