Riding the wave of strong U.S. natural gas demand and project development milestones, Sempra management reported it is now targeting a final investment decision (FID) for its Port Arthur LNG project during 1Q2023 and is currently marketing its proposed expansion.

San Diego-based Sempra’s liquefied natural gas subsidiary, Sempra Infrastructure, has been developing the project southeast of Houston for several years as a part of its growing list of proposed export projects in the United States and Mexico. 

After a series of FID setbacks since 2020, Sempra CEO Jeffrey Martin said the firm has made “significant progress on advancing development at Port Arthur LNG” and is nearing the next step in its development.

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Management said one of the largest milestones for the project during the quarter was the completion of an engineering, procurement and construction (EPC) contract update by Bechtel Energy Inc. Last month, the firm informed Sempra the project could cost $10.5 billion, up from an estimated $8.9 billion in 2020.

The first phase of Port Arthur LNG, which is fully permitted, may produce up to 13.5 million metric tons/year (mmty). Sempra disclosed that it had marketed a majority of its first phase capacity at Port Arthur earlier in the year. A second phase, already in the permitting process, could add an additional two trains and boost capacity to roughly 27 mmty.

CFO Trevor Mihalik said Sempra would begin raising capital for Port Arthur LNG by issuing project level debt within the next few weeks. It will also be looking to secure more equity partners by selling stakes “to one or more investors.”

Early in the year, Houston-based mega independent ConocoPhillips inked a tentative agreement for a 30% stake and 5 mmty of offtake from the proposed facility.

Sempra also has a potential agreement with the Ineos Group Ltd. for offtake from Port Arthur. Sempra also landed a 2.25 mmty offtake agreement with Germany’s RWE AG. In addition, Polish Oil & Gas Co. signed a preliminary agreement for 3 mmty that could come from the second phase of its Cameron LNG facility in Louisiana and Port Arthur.

“The interest of importers in Port Arthur LNG exceeds the volume of phase one and we’re actively marketing an expansion that could include a combination of trains three and four,” Sempra Infrastructure CEO Justin Bird said.

Bird added that the company is considering the cost and timeline advantages of moving its contractors swiftly from the first phase of Port Arthur to the second, and could have more details on Phase 2 in the fourth quarter of this year.

Management said Sempra is also eyeing an FID for its next project, the second phase of its Cameron LNG facility in southwest Louisiana. The company anticipates it could reach FID on the fourth train at Cameron sometime after the summer, when the front-end engineering and design process is expected to be completed.

ECA Delays

In Mexico, management said construction on the 3 mmty first phase of its Energia Costa Azul  (ECA) LNG project in Baja California is progressing, but could be several months behind schedule due to delays. Bird added that the delays haven’t added any budgetary issues and Sempra still expects “to commence commercial operations in the middle of 2025.”

While construction proceeds, management said the substantial transportation capacity the company will eventually use to transport gas from the Permian Basin to supply ECA is allowing it to “optimize” its business in Mexico and capture widening spreads between Waha and Henry Hub.

Sempra also expanded its potential development of low-carbon fuels for export during the quarter with a framework agreement with Avangrid Inc. The two companies could explore green hydrogen and ammonia projects using renewable power generation for domestic and international customers.

Sempra reported 3Q2022 earnings of $485 million ($1.53/share) for 2Q2022, compared with a loss of $648 million (minus $2.03) in the year-prior period.