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Port Arthur LNG final investment decision likely to be delayed to 2022 – 5/11/2021

Sempra Energy will likely further delay a final investment decision on its proposed 11 million mt/year Port Arthur LNG project in Texas, this time to 2022, as it continues to face commercial challenges a year after the coronavirus pandemic began to affect the global marketplace, Chief Financial Officer Trevor Mihalik said May 5.

Strong near-term prices and demand in Asia and Europe, while a bullish sign for existing liquefaction terminals, has so far not translated into sufficient commercial activity to allow most US developers to sanction the construction of new facilities over the last 12-18 months.

Though short- and medium-term contracting has been relatively robust, only a few new long-term contracts tied to US terminals have been signed over that period. Sempra, which operates the Cameron LNG terminal in Louisiana and is building a liquefaction facility at its Energia Costa Azul import terminal in Mexico, has not been immune to those dynamics.

Given Sempra’s work to reduce its greenhouse gas emissions profile and make its expansion plans more competitive, as well as the continued impact of the pandemic on global energy markets, it is more likely that the FID for Port Arthur LNG “will move to next year,” Mihalik said during an investor conference call held to discuss Sempra’s latest financial results.

The only firm supply deal tied to Port Arthur LNG that has been announced to date is a 2 million mt/year sales and purchase agreement that Poland’s PGNiG signed in December 2018. A preliminary agreement that Saudi Aramco signed in May 2019 to take a 25% stake in Port Arthur LNG and lift 5 million mt/year of supply from the facility has not yet been finalized some two years later.

“I don’t see any scenario that we would probably take FID without having it fully contracted,” CEO Jeffrey Martin said on the call.

During the call, executives did not address specific timing for FID on a proposed second phase of Cameron LNG, beyond saying that initial design and technical work was continuing and commercial discussions with partners including Total and Mitsui was progressing.

“We continue to be very optimistic about our development portfolio,” Martin said.

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