Sempra Finds Strategic Partner for Proposed Port Arthur LNG Facility

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--A 20-year sales and purchase agreement related to liquefied natural gas (LNG) from a new facility proposed for Port Arthur, Texas, puts the project one step closer to reality, the developer said.

Sempra Energy (NYSE:SRE) (San Diego, California) said it expects to make a final investment decision (FID) on the first phase of a liquefaction facility at Port Arthur during the first quarter of 2023. With a newly-minted sales agreement for 5 million tons of LNG per year with ConocoPhillips (NYSE:COP) (Houston, Texas), the FID looks promising.

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Jeffery Martin, the chief executive of Sempra, said signing up with ConocoPhillips is indicative of shared interest across the global LNG value chain.

"Together, we have a shared view of the role this facility can play in supporting global economies with energy supplies that advance both energy security and environmental goals," he said.

Sources for The Wall Street Journal hinted at the possibility of a breakthrough agreement between the two parties in an early November report. If built, which seems likely, the facility would be the first, as well as the largest, to come online since the start of the war in Ukraine in early February, a war that's upended global markets for everything from crude oil to natural gas and wheat.

Before the outbreak of war, members of the European Union relied on Russia for 40% of their natural gas supplies. The Organization for Economic Cooperation and Development (OECD) in its latest global outlook report found that those supplies have been cut in half, largely by drawing on other suppliers such as the United States.

"Nonetheless, the war in Ukraine continues to have substantial effects on the euro area economy through higher energy prices, persistent supply chain disruptions and rising input costs," the OECD's report read.

Analysis from the U.S. Energy Information Administration (EIA) finds the European continent has added around 1.7 billion cubic feet per day (Bcf/d) in LNG regasification capacity already this year. That could expand by 34% by 2024, which shows the importance of building up LNG trains in the U.S. South.

The EIA adds that new regasification capacity can be brought online in relatively short order in Europe by chartering floating terminals, similar to recent developments offshore Mozambique.

At home, federal estimates show total U.S. dry natural gas production should average 99.7 Bcf/d in 2023, a 2% increase from the expected average this year. During the seven-day period ending Nov. 17 , U.S. LNG export facilities received 12 Bcf/d of natural gas on average.

During that same period, 22 vessels laden with LNG left U.S. export terminals carrying a combined 82 billion cubic feet of gas in the liquid form. Sempra's proposal for a $10.5 billion export facility off Port Arthur will only add to those levels.

If built, the facility could be exporting LNG by 2027. Under the terms of the sales and purchase agreement, ConocoPhillips takes on 30% of the equity in Phase 1 at Port Arthur and would manage the feedstock requirements.

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