August 5, 2022


Sempra's US LNG Plans Expand Further

One quarter ago, Sempra made no mention of a Port Arthur LNG Phase 2, but that project has now entered the conversation.

The proposed 13.5 million ton per year Port Arthur terminal in Texas has gone from the back burner to the front burner, now with a proposed 5-to-10 million ton per year Phase 2 on the drawing board.

Port Arthur LNG, Phase 1

Yet there is still some distance to go on what President and CEO Jeff Martin dubbed "Phase 1" in the company's second-quarter earnings call this week.

It has full regulatory approval and "highly advanced" permitting and design work, said Justin Bird, head of Sempra's LNG unit.

The key remaining work, according to Bird, involves finalizing the EPC contract with Bechtel to include updated pricing, and signing definitive offtake agreements.

Bird noted that since last quarter, Sempra has secured heads of agreement (HOA) with Germany's RWE, Poland's PGNIG and the UK's Ineos, and set up a strategic partnership framework with ConocoPhillips, under which Conoco would receive roughly half of the offtake volumes, or 5 million tons per year, under a 20-year tolling type arrangement. Conoco would also potentially make a 30% equity investment in Phase 1.

Yet the timeline for the final investment decision (FID) has not formally accelerated.

"At Port Arthur, we're not prepared to set an expected FID date yet, but I can confirm there are scenarios where FID could occur in 2023 and even in the first half of 2023," said Martin, adding that the next step is to "make sure we convert" the HOA to firm sales and purchase agreements.

Cameron, Phase 2

Meanwhile, the 6 million ton per year Cameron LNG Phase 2, hasn't accelerated its timeline from last quarter, either. The project is still expecting to complete front-end engineering and design in the summer of 2023.

"We actually delayed the project somewhat to make sure that we could be more competitive," said Martin.

One of the changes was electric drive liquefaction. "It does help us with the Europeans, but it's actually intrinsically aligned with how we think about our own business," he said, referring to environmental friendliness.

Also of help in talking to Europe is Sempra's corporate orientation. "We've been in the gas business for over 100 years. We have a lot of established relationships. So if you're talking with a utility in Europe ... it's important to them that we've got that utility background, that strong balance sheet," Martin said.

Disciplined Strategy

"We have maintained a disciplined marketing approach with a focus on linking US natural gas production with some of the leading European buyers of LNG. This strategy has served us well in the current environment given supply disruptions in Europe," said Bird, although the company is focused on Asia as the leading long-term market.

"We're running this business for utility shareholders, right?" added Martin, "so we have a defined view about our strategy, investing in T&D [transmission and distribution] type assets that have low risk."

"There's a lot of other opportunities in the LNG space for people that want to be commodity exposed or take construction risk," he said.

Sempra's lead focus in the LNG space is making sure its Mexican Costa Azul project finishes on time and on budget, followed by a focus on Cameron Phase 2, and Port Arthur Phase 1.
Michael Sultan, Washington

Petronet Finding Difficulty Sealing Term Deal

Petronet LNG is finding it difficult to seal a long-term deal.

Petronet wants to buy 0.75-1 million tons per year of LNG, but the sharp spike in spot prices has pushed up term deal price slopes, the company's Director of Finance Vinod Mishra said Friday.

Any deal that offers a slope of over 18% of Brent crude is unaffordable and does not make sense, Mishra told analysts during a conference call.

Dialogue With Qatar

Petronet is presently sourcing 7.5 million tons per year of LNG from Qatar at a 12.67% slope to Brent plus a 52 cent constant on an f.o.b. basis. That long term deal expires in 2028.

“The time is not good for long term sourcing,” Mishra said. He added that Petronet is in dialogue with Qatar for the extension of its existing long-term deal with tenure and price being the key points of negotiation.

Petronet could seal the deal with Qatar for the additional volume if the slope quoted matches its expectations.

Petronet is India’s largest LNG importer with just over half of India’s total regas capacity. It is in the process of expanding the capacity of its Dahej terminal on the west coast to 22.5 million tons from 17.5 million tons. It is also planning a floating storage and regasification unit (FSRU) at Gopalpur on India's east coast.

Gail's Troubles

State-owned Gail India Thursday said that its own tender for importing 0.75-1 million tons of LNG on a term basis did not get desired result. The bids quoted were too high for comfort, the company said.

Gail India said this week that it has not received several cargoes due to Gazprom's corporate turmoil in the wake of Russia's Ukraine invasion.

India is a price sensitive market as LNG competes with alternative liquid fuels and cheaper domestic coal.
Rakesh Sharma, New Delhi

ConocoPhillips Eyes Bigger Role in Global Gas Trade

ConocoPhillips CEO Ryan Lance said Thursday the company was intrigued by the possibility of becoming a much more active player in the global gas trade following a string of recent LNG deals.

The Houston-based independent is currently marketing seven to eight billion cubic feet of gas per day in North America, Lance said during ConocoPhillips' second-quarter earnings call. A recently announced non-binding agreement with Sempra to develop Port Arthur LNG in Texas could take some of that supply to global markets.

“That very integrated nature all the way from the supply side through taking the gas and selling it to customers is what was of interest to us" in the Sempra deal, Lance said.

ConocoPhillips already has a long history of marketing LNG to global markets, especially in Asia. It is currently involved in global LNG projects in Qatar and Australia, and has commercial teams in London and Singapore.

"We’re used to both the European and Asian markets,” Lance said.

Willow Decision Looms

Meanwhile, Lance said the regulatory process for its planned Willow oil development in Alaska was in the "final throes." A federal court scrapped key permits for the project last year after finding that the US Department of the Interior failed to properly account for the full suite of carbon emissions and wildlife impacts from the development.

Since then, US regulators have released a new draft environmental review for Willow, which is currently taking comments.

"I think we know where everybody stands," Lance said. "So it's time to make a decision to move forward. And we look forward to that record of decision coming here later this year so we can get moving forward on the project. We think we've satisfied all the concerns that the federal judge has had, and we're ready to move forward."

If the government approves the revised development plans for the 600-million-barrel resource, a final investment decision could come later this year or early next.

Work could commence during the 2022-2023 winter construction season, starting with roads and other civil construction projects, for the planned 180,000 b/d project.

Quarterly Snapshot

ConocoPhillips said it would increase planned shareholder returns by $5 billion to a total of $15 billion this year. Capex was bumped up by $200 million above previous guidance to $7.5 billion.

However, full-year production guidance was lowered by 1% to 1.74 MMboe/d due to disruptions in Libya.

ConocoPhillips Q2'22 Earnings Results
($ million)Q2'22Q2'21%Chg.Q1'22
Revenues $21,989 $10,211115%$19,291 
Operating Cash Flow 12,982 6,331 105%5,068
Net Income 5,145 2,091146%5,759
Adjusted Income 5,0861,716196%4,289
Production ('000 boe/d)1,6921,796-5%1,747

Jeffrey Cavanaugh, New Orleans

In Brief

Eni Buys Tango FLNG Vessel for Congo

Italian major Eni has purchased the Tango FLNG vessel from floating gas specialist Exmar to speed production from its Marine XII block offshore Congo-Brazzaville.

The vessel is expected to be moored on location later in 2023 with first production expected before the end of next year.

Eni is looking to Tango to help fast-track its plans offshore Congo, with its capacity to produce about 600,000 tons of LNG per year.

Eventually Eni would like to produce about 3 million tons/yr from its Marine XII block using a modular floating LNG development scheme that will be directed entirely to the red-hot LNG spot market.

Tango originally was built on order from Argentina’s YPF in order to send out gas produced in the country’s Vaca Muerta shale play.

But YPF sold the unit back to Exmar after gas production volumes in Argentina lagged expectations and LNG prices fell during the pandemic-driven energy downturn.
Noah Brenner, London

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India42.8843.3442.9643.3342.5542.3743.8042.0343.7242.9942.2141.9442.30
Sodegaura, Japan43.5544.9444.9645.0543.5240.1244.5742.4544.4445.3942.7841.9443.71
Zeebrugge, Belgium37.5035.9235.5735.9937.0237.3536.6535.5436.5135.5637.1436.2537.23
Huelva, Spain47.8346.1745.7946.2547.2847.0746.9245.7046.7945.7947.3446.3247.36
Isle of Grain, UK32.3730.8430.5130.9031.9332.2231.6530.4831.4230.4932.0231.1632.11
Everett, US6.905.575.895.626.646.520.
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback28. Feb14. Mar28. Mar11. Apr25. Apr9. May23. May6. Jun20. Jun4. Jul18. Jul1. Aug102030405060Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0046.160.1246.16
SW Europe0.0048.511.9548.51
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-
NBP, UK (futures)-0.6745.1145.7842.49
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-2.1558.1960.3357.22
Zeebrugge (Belgium)--30.65--27.50
German NCG-0.5256.2156.7356.14
NBP (UK)2.1733.2031.0331.88
US Markets
US Spot Prices
Sabine Pass, Louisiana-
Corpus Christi, Texas-0.067.847.908.11
Cove Point, Maryland0.027.837.817.83
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-
Second Mth-
Third Mth-
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaAug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22020406080Energy Intelligence