Sempra Energy CEO Debra Reed on Thursday told financial analysts at a meeting her company hosted in San Diego that shale gas and renewables will be at the center of Sempra’s focus in the next few years.
Coal-to-gas conversion in the electric generation sector is going to be just as profound as the emphasis on gas system safety for pipelines, Reed said. “We see the coal conversion as driven not just by environmental regulations but also by another major trend, and that’s shale gas.
“Shale gas has changed, and will continue to change, gas being used for generation. It will also change the economics of gas for other uses, such as bringing back chemicals and manufacturing operations to the United States. You also hear about increased use of natural gas for transportation. We see all of this as an indication this is here to stay.”
Reed said shale gas also will make the export of U.S. liquefied natural gas (LNG) a reality, driven by the record low prices for U.S. gas supplies.
The other trend — renewables — is not driven by the market so much as government mandates, she said.
As a third area of growth focus, along with U.S. and Mexico/South American utilities, the midstream gas space and renewables are areas Sempra thinks can be bolstered by a foundation of LNG exports and the build-out of new infrastructure that exporting U.S. gas will create.
“These involve our municipal and utility customers — the customers for both our gas storage and our renewables businesses — and we understand what their needs are because we run large utilities ourselves,” Reed said. “We believe these businesses can grow and they can grow on the foundation of LNG exports and the infrastructure that is going to be needed to support this changing gas environment, such as the coal-to-gas conversion.”
Reed said Sempra has the track record and skills in storage, transmission, pipeline safety and other areas that are transferable to other utilities around the nation, noting that Sempra is looking to “enlarge our footprint” in the U.S. utility space. “We’re particularly interested in utilities that are adjacent to our current service territories [in California and Alabama] or adjacent to our current midstream businesses [in the Southeast] and that have at least two growth platforms in the utility and midstream businesses.”
For renewables, Sempra wants to greatly expand its share of wind and solar joint venture projects with a unit of BP to have more diverse technologies, customers and regulatory environments. If it turns out as planned, this part of the company’s businesses will generate $100 million in revenues with 20- to 25-year contracts by 2016, according to Reed, who in contrast emphasized the company will not be expanding as a merchant generator in the gas-fired generation sector.
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