The newly formed Sempra LNG Corp. plans to acquire Dynegy Inc.’s proposed Hackberry, LA liquefied natural gas (LNG) project for an initial payment of $20 million and additional contingent payments based on development milestones and performance. Pending approvals, commercial operation of the planned 1.5 Bcf/d facility is scheduled for early 2007.

The facility, which is expected to cost about $700 million to develop, will be sited along the Gulf of Mexico, with two docks and storage capability of 10.4 Bcfe. It already has received preliminary approval from the Federal Energy Regulatory Commission, with a final decision anticipated this year (see Daily GPI, Dec. 19, 2002).

The Louisiana acquisition dovetails with Sempra’s planned North Baja LNG receiving terminal, for which the company expects a decision from Mexico’s federal energy regulators in July, according to a San Diego-based Sempra spokesperson. Hackberry has no designated source of gas, but Sempra at this point is not considering Bolivian supplies — its proposed source at North Baja — as viable for the gulf coast plant. The two projects are, however,on the same timeline for development with Baja projected to start in late 2006-early 2007. Together, Sempra expects to invest more than $1.3 billion for the two LNG projects.

A plant in Louisiana, however, will have no impact on the pending Mexican regulatory decision, the Sempra spokesperson said. “They are two separate projects,” with two separate Sempra subsidiaries–Sempra LNG Corp. and Sempra Energy International for Baja. “However, they’ll come on line pretty close to one another.”

Under FERC’s preliminary approval, Hackberry would operate under market-based rates and have the capacity to receive and vaporize 750 MMcf/d initially and be expanded to 1.5 Bcf/d later. Dynegy first announced plans to build the LNG terminal in July 2001 at its existing liquefied petroleum gas terminal located in Hackberry.

“As domestic supplies of natural gas fail to keep pace with energy demand in North America, LNG is going to become an increasingly important part of the energy supply mix for North America over the next decade,” said Donald E. Felsinger, group president of Sempra Energy Global Enterprises. “This strategic acquisition of the Hackberry project will provide us a solid foothold in this critical market.”

Darcel L. Hulse, president of Sempra LNG, said that the “biggest single challenge in meeting North America’s natural gas demand will be the siting and permitting of new LNG receipt facilities.” The Hackberry project “enjoys a good location, is well advanced in the permitting process and has received a precedent-setting preliminary approval from the FERC that provides much-needed flexibility for the development of LNG infrastructure.” Hulse added that the acquisition will “greatly accelerate” Sempra’s LNG plans in North America.

“This agreement is yet another example of the new Dynegy executing on a self-restructuring plan designed to keep our business model focused on our core operating units and to prudently manage our capital expenditure commitments,” said Bruce A. Williamson, Dynegy CEO. Williamson said Dynegy was “pleased” that Sempra was making LNG a “strategic focus for their organization.”

Sempra Energy International also has proposed building the Costa Azul LNG project in Baja California, Mexico, at a site about 14 miles north of Ensenada (see Daily GPI, Jan. 6). The Costa Azul project is currently under review by Mexico’s national energy and environmental regulatory bodies. A ruling by Mexican authorities is expected by mid-year, according to Felsinger.

Together, Sempra’s Hackberry and Costa Azul LNG projects would process a combined total of 2.5 Bcf/d once they are operational. The closing of the Hackberry transaction will depend upon customary federal waiting periods, according to Sempra.

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