Sempra seeks Port Arthur LNG partners

Noting that more traditional memoranda of understanding (MOU) won’t give them the assurances they need for the multi-billion-dollar Texas facility, Sempra’s top executives said they are going after final sales agreements with potential shippers and buyers, bypassing the MOU stage. All of the deals would be for the global market after 2020.

South of the border, where Sempra’s IEnova subsidiary is the largest pipeline developer/operator in Mexico, Sempra hopes to land three new contracts this year totalling nearly $2bn for added natural gas pipeline infrastructure.

For new LNG projects “there is no question that the market is tougher than when we signed contracts for the first three trains at our Cameron [LA] project, but we have been negotiating with some very strong counterparties who want to go to sales/purchase agreements, and we do, too,” Sempra CEO Debra Reed said.

“Getting sales/purchase agreements signed would give us a lot of confidence moving ahead with the facility later this year,” she added.

Octavio Simoes, president of Sempra LNG, said the global market pricing today is “broken,” and it will go through adjustments in the next two years. Currently, spot market cargoes are being priced above long-term contract pricing, he said.

“Unless you believe that globally we are going to switch everything from gas to oil and coal, which would decrease our footprint significantly, it seems like the headwinds are blowing the other way,” said Mr Simoes, noting that the push for a lower carbon footprint worldwide will open new and larger markets for gas.

A different set of economic and political pressures come into play in Mexico, where the national oil company, Petroleos Mexicanos (Pemex) is under increasing political pressure because of lower energy revenues for the federal government. But Sempra senior officials see this as an opportunity.

“The whole reason for reform of Pemex was to bring capital into Mexico to build the kind of infrastructure it needs for the kind of growth it wants,” Ms Reed said.

“Mexico is going to be more competitive the lower the energy prices are in the long term. So to the degree they can use other parties’ capital from sources like us to build the infrastructure to reduce their energy costs, they will move forward on that basis.

“The struggle for Pemex with its heavy reliance on oil revenues is an opportunity for us to come in and build things that are needed as part of the Mexican long-term infrastructure,” she added.