Sempra Scales Back Its Ambitious LNG Project Outlook

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Sempra -- which has now dropped "Energy" from its corporate name -- has scaled back its once aggressive LNG ambitions and even lowered the corporate profile of LNG. Sempra Chairman and CEO Jeff Martin was nevertheless optimistic about LNG, citing forecasts for a 50% growth in world liquefaction capacity and specifically a US Energy Information Administration (EIA) forecast for US LNG exports to double by the end of this decade. However, in the LNG space, "long-term fundamentals are great, but there are short-term headwinds," said Justin Bird, CEO of subsidiary Sempra LNG (NGW May10'21). The 3.25 million ton per year (0.46 billion cubic foot per day), $2.4 billion, Energia Costa Azul (ECA) Phase 1 is Sempra's "top priority," said Bird, keeping it "on track, on budget." The only LNG export project in the world to reach a final investment decision (FID) in 2020 is under construction and targeted for start-up at the end of 2024. As for ECA Phase 2, which could be a 12 million ton/yr (1.7 Bcf/d) expansion, no timeline was provided. Meanwhile, the memorandum of understanding with Saudi Aramco for the proposed 11 million ton/yr (1.6 Bcf/d) Port Arthur LNG on the Texas Gulf Coast has been allowed to expire as Aramco re-evaluates its plans. "We see additional opportunities to work with them, both in the LNG space and blue hydrogen," Bird said. "We have the opportunity to evaluate design changes for Port Arthur -- reduce emissions 60%-65%," Bird said, adding that "we're bullish on the Port Arthur business case, but the timeline slipped." Sempra wouldn't provide an FID timeline projection at all for Port Arthur. The California-based company is looking at electric drive for liquefaction at Port Arthur and has been approached by parties interested in adding carbon capture and hydrogen production at the site -- options the firm is "actively pursuing." Meanwhile, Cameron LNG Phase 2, which was long expected to add a pair of 4.5 million ton/yr (0.64 Bcf/d) trains in Louisiana, is now slated to get a single 6 million ton/yr (0.85 Bcf/d) Train 4. Bird explained that innovations in train design led to a lower capital expenditure per ton without the need for additional trains. Lessons from Train 4 will be used to debottleneck Trains 1-3 resulting in the "lowest cost LNG in the world." Sempra is talking with several existing non-US partners at Cameron -- TotalEnergies, Mitsui and Mitsubishi -- during pre-front-end engineering and design (Feed) for Phase 2. It plans to start Feed this year with an FID around the end of 2022. "We've always expressed optimism on Cameron [Phase 2]," Martin said. Displacing Coal, Oil Abroad "LNG infrastructure is needed to displace coal and oil in developing markets," Martin said of the company's decarbonization strategy, which includes renewable investments. Sempra intends to be net zero in terms of carbon emissions by 2050 (NGW Jun.21'21). But Sempra's decarbonization plan is somewhat different than that of rival Cheniere Energy. Unlike Cheniere, Sempra hasn't said is pursuing cargo emissions tags to account for the carbon in each cargo (NGW Mar.1'21). However, Sempra did say that it is looking toward electric drive liquefaction, carbon capture utilization and storage (CCUS) as well as studying emissions all along the value chain. Sempra is proposing the Hackberry, Louisiana, CCUS project. which would sequester 4.5 million tons per year of CO2 from Cameron LNG as well as other industrial sites in the area. "Expect news in the future," Bird said, while cautioning that a two-year approval process can be expected. Restructuring Afoot Sempra's LNG projects are now part of its Sempra Infrastructure unit, although led by Bird, who retains the title of CEO of Sempra LNG. KKR's acquisition of a 20% stake in Sempra Infrastructure for $3.37 billion, a transaction done earlier this year, is on track to close in the coming weeks (NGW Apr.12'21). The KKR deal helps make Sempra Infrastructure self-funded. This means Sempra Infrastructure can "live within their own capital budgets, based on existing revenue," Martin said. "LNG is not going to impact our utility story." Will Sempra ever separate its LNG business from its vast utility operations? Company officers were cagey about that question. "We are simpler today, we are leaner, more focused," said Martin, noting a portfolio that already takes advantage of synergies. "We’re not shy about making changes when needed." Michael Sultan, Washington

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