Although the global landscape is still unsettled for energy, and specifically liquefied natural gas (LNG), opportunities will continue to develop, and Sempra Energy has the right mix of trading, infrastructure development, operating and risk management skills to take advantage of whatever opportunities arise, said Sempra COO Neal Schmale, speaking at a company-hosted financial analysts meeting Thursday in San Diego. Sempra raised its 2007 earnings-per-share guidance to $3.75-3.95.
Although he openly refused to answer an analyst’s question about when LNG would become a global commodity and at what price range it would likely be traded, Schmale said that Sempra plans to do well regardless of what develops. For planning purposes, he said Sempra generally was assuming that LNG can be economically imported into North American in the $5-6/Mcf range.
Schmale acknowledged that there has been a lot of talk in the financial community about the current delays in building LNG liquefaction facilities around the world. “The key point is that the fundamentals of this business [global demand] have not changed,” he said, noting that there have been some “hiccups” in the development of liquefaction capacity.
“This has presented some challenges for us, but it also has created some opportunities,” Schmale said. “What we are dealing with now is a relatively fragile balance between supply and demand — particularly in North America — and in that fragile balance weather changes and impacts on storage and infrastructure are all sort of magnified. This in turn causes increased price volatility, increased storage opportunities and increased pipeline capacity needs that we have been able to capture.”
Sempra expects the current price/supply volatility to persist “for some time,” he said.
Similar opportunities exist for Sempra’s utility operations in the increased global warming mitigation push and the generally stepped up attention given environmental issues. Schmale said Sempra is viewing these as “environmental opportunities” — because of its “clean generation base” and its large utility customer base between Southern California Gas Co. and San Diego Gas and Electric Co.
“In the hard asset business, we seem to think of environmental issues as cost, but the shift in the way we are thinking about these things now is to look at them as opportunities. The growth opportunities, the quality of these opportunities, and our ability to early identify these opportunities is what really sets this company apart,” Schmale said.
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