Port Arthur LNG Export Project Takes Another Big Hit

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Sempra Energy’s proposed Port Arthur LNG terminal wasn’t shelved last week, but it was certainly relegated to the far back burner. The reason: Polish state-run PGNIG pulled the plug on a sales and purchase agreement (SPA) that would have derived 2 million tons per year (275 million cubic feet per day) of LNG from the terminal in coastal Jefferson County, Texas, across the border from Louisiana. It was the only deal left supporting the project. Meanwhile, the Polish gas giant upped its commitments to buy US LNG by an additional 2 million tons/yr from Venture Global LNG projects on the Louisiana coast. But it’s not the zero-sum game it first appears to be. PGNIG is still agreeing to buy the Port Arthur volumes from Sempra, only it will be derived from Sempra’s portfolio, the parties said. The issue is the terminal has no set path for a final investment decision. In May, Saudi Aramco pulled out of an interim deal it made with Sempra in 2020, which firmed up a 2019 heads of agreement in which Aramco proposed purchasing 5 million tons/yr (685 MMcf/d) of LNG and taking a 25% equity stake in the terminal project. This significantly undermined the viability of the 13.5 million tons/yr (1.8 billion cubic feet per day) LNG export project. Sempra still says it hopes to one day expand Port Arthur to 45 million tons/yr (6.2 Bcf/d), making it one of the largest LNG projects in North America. A Case to Go Forward? Energy Intelligence Research & Advisory Director Ian Nathan said the project had been on the list of those likely to go forward based on PGNIG and Saudi support, but without it Port Arthur's star has faded. It also seemed counterintuitive that Sempra was seemingly prioritizing greenfield Port Arthur development over Cameron LNG expansion plans, in which it also has a stake, he added. Sempra is a majority stakeholder in Cameron LNG, a 12 million ton/yr export facility operating in Hackberry, Louisiana. Plans are to expand the terminal with an additional 6 million tons/yr train. “I suspect that this was fueled at least in part by both PGNIG and Saudi Aramco support. Of course, now that’s changed,” Nathan said. Nonetheless, PGNIG’s nonbinding agreement to take the volumes from Sempra’s North American portfolio is “vote of confidence for Sempra to deliver elsewhere -- which is important for PGNIG’s supply strategy,” he said. Sempra is also a stakeholder in the 3 million ton/yr Energia Costa Azul LNG export terminal. The plant in Baja California, Mexico, is under construction with operations targeted in late 2024. PGNIG Ups US Supply Deals Meanwhile, PGNIG is committing to importing an additional 2 million tons/yr of LNG from Venture Global’s two export terminals being developed on the Louisiana Gulf coast. PGNIG's 20-year contracts will start when two 10 million tons/yr export terminals enter service. Calcasieu Pass is under construction with commercial deliveries set to start by early 2023. Plaquemines LNG is targeted for start-up in 2024 but has yet to get an official green light. Venture Global is a favorite would-be supplier for PGNIG; it had already contracted with Venture for 3.5 million tons/yr in 2018-19. The agreements signed this week actually amend those agreements to bring the volumes PGNIG has agreed to buy to 5.5 million tons/yr (750 MMcf/d) on a f.o.b. basis. PGNIG will now purchase 1.5 million tons/yr from Venture's Calcasieu plant, rather than 1 million tons/yr originally contracted. And it will purchase 4 million tons/yr from the Plaquemines project rather than the 2.5 million tons/yr originally contracted. “LNG plays a vital role in PGNIG’s strategy. It is a key component of our supply portfolio diversification and the plan to reinforce the energy security of our customers. Moreover, based on LNG, we plan to develop our commercial activity in the global trading market. Expanding our cooperation with Venture Global LNG fits in with both of these goals,” said Pawel Majewski, PGNIG's CCO. PGNIG Supply & Trading (PST), a subsidiary of Poland’s PGNIG Group, and Knutsen OAS Shipping, have signed contracts for chartering two LNG carriers primarily to transport LNG from US liquefaction facilities contracted by PGNIG. The chartered ships, to be delivered in 2024, will have a capacity of 174,000 cubic meters. PST will be their sole user for at least 10 years with an option to extend the contract. Tom Haywood, Houston

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