Nov. 05–Sempra Energy’s commitment to the global liquefied natural gas sector took another step Monday, as French energy giant Total signed a memorandum of understanding with the San Diego-based Fortune 500 company.
The memo provides a framework for the two companies to cooperate on further developing an LNG export project already underway in the Gulf Coast and an export facility under consideration in Mexico.
Total looks to potentially contract for up to 9 million tons per annum (Mtpa) of LNG in the second phase of the $10 billion Cameron LNG facility in Hackberry, Louisiana.
In addition, Total may also acquire an equity stake in an anticipated LNG export facility at the Energía Costa Azul facility near Ensenada, Mexico, that is operated by IEnova, a Sempra subsidiary.
“Sempra Energy has a long-term goal of developing more than 45 Mtpa of LNG export capacity in North America,” Sempra CEO Jeff Martin said in a statement. “That is why our relationship with Total is so important. We plan to leverage the competitive strengths of both companies to accelerate development of North American LNG exports to global markets.”
Total already has a 16.6 percent stake in the Cameron LNG project, which is expected to begin operations next year. LNG processing units are called “trains” and Cameron is scheduled to have three trains up and running in the first phase of its construction. The second phase of the project calls for two more trains and the construction of two additional storage tanks with 9 Mtpa of LNG.
Sempra anticipates its share of earnings from the three trains at Cameron at between $365 million and $425 million a year.
Natural gas can be transported in containers via a process in which it is cooled to minus-260 degrees Fahrenheit and turned into liquid. Once at its destination, the LNG is warmed and regasified so it can be used just like existing natural gas.
“We are pleased to collaborate with Sempra Energy and the other Cameron LNG co-owners to extend the Cameron LNG project and to further enhance its competitiveness,” Patrick Pouyanné, chairman and CEO of Total, said, “but also participate in the development of export capacity on the West Coast of Mexico, which will benefit from synergies with existing infrastructure and from a significant shipping cost advantage for customers in Asia.”
Establishing an export facility on the West Coast is considered attractive because LNG shipments can go directly to the Pacific Ocean, making the route shorter and less expensive than shipments from the Gulf Coast because the shipments would not need to go through the Panama Canal.
Markets in Japan and China make up some of the world’s largest customers for LNG shipments but the Chinese government in September responded to tariffs imposed on its goods by the Trump administration by slapping a 10 percent tariff on LNG from the U.S.
“It seems to me they (Sempra) are positioning themselves as a company to meet that growing Asian demand that should be coming,” said Matthew Hong, director of research for power and gas at Morningstar Commodities Research. “Hopefully, some of these trade concerns and issues start to dissipate over the next couple of years.”
In addition to its projects in Louisiana and Mexico, Sempra also has plans to construct a big LNG facility in Port Arthur, Texas. Though a final decision has not officially been made, Sempra and its partners have already lined up contracts with government-run energy companies in South Korea and Poland to take cargoes of LNG.
For years, U.S. companies were a non-factor in the global LNG sector but the natural gas production boom in recent years in places like Texas and North Dakota changed all that.
The first U.S. LNG export facility opened in 2016, the second opened in Maryland earlier this year and Sempra is among a number of companies racing to get facilities up and running. Some analysts have predicted LNG growing 4 to 5 percent a year through 2040.
Based in Courbevoie, France, Total is one of the world’s oil and gas “supermajors” and is one of the world’s leading players in the LNG sector. It is a shareholder in 12 liquefaction facilities that generate 25 percent of global LNG output.
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