Sempra taking two-coast approach to LNG

Sempra Energy, which is investing billions of dollars in a liquefied natural gas export terminal in Port Arthur, is pursuing a two-coast strategy that would mostly target Europe from two LNG plants along the Gulf Coast while a facility planned for the Pacific Coast would mostly serve customers in Asia.

The company, headquartered in San Diego, said 20-year LNG supply contract with Poland signed in Warsaw on Wednesday proves out the strategy. Financial terms were not disclosed, but Poland has pledged to buy 2 million metric tons of LNG per year from the planned Port Arthur terminal, an amount that will meet about 15 percent of the East European nation’s daily energy needs.

Federal regulators are expected to make a permit decision for the Port Arthur project in May, but Sempra Energy CEO Jeff Martin called the deal with Poland an important step toward the company’s previously announced goal of being able to export up to 45 million metric tons of LNG per year — equivalent of California’s daily natural gas consumption.

“We’re in the first inning of a nine-inning ball game,” Martin said. “America’s natural gas production potential is quite significant.”

Sempra plans take advantage of record U.S. natural gas production with three LNG export terminals, including its Port Arthur complex, Cameron LNG facility in Hackberry, La. and Energia Costa Azul LNG facility in Baja California, Mexico. Three production units at Cameron LNG are expected to come online and start exporting to long-term customers in Japan and France over the next 12 months.

If approved by regulators and Sempra’s final investment decision is made by the end of next year, the Port Arthur facility in Texas could be operational by 2023.

The Baja California terminal will receive natural gas from the Permian Basin of West Texas and the San Juan Basin of New Mexico and Colorado, Martin said. By shipping from the West Coast, Sempra cuts the trip to Asia by

more than half, down to 12 to 15 days from about 35 days from the Gulf Coast.

“We’ve got a portfolio of opportunities in Europe and Asia,” Martin said, “but there’s no question that with respect to the Asian market, if you can get Texas gas to the West Coast of Mexico, you’ve got a real opportunity and an advantage in the Asian market.”

LNG prices vary based on the time of year, but are generally higher in Asia than Europe. Most natural gas in the United States produced below $3 per million British thermal unit. Sempra said it can liquefy and deliver it for between $6.50 and $8.50, a price that is competitive with other sources of natural gas in overseas markets.

In Poland’s case, Martin said energy security was a key factor in the deal with Port Arthur LNG. The East European nation currently imports most of its natural gas from Russia, which has tried to use the energy as leverage in its relations with Europe.

But following recent visits to Poland by President Donald Trump and Energy Secretary Rick Perry, the former Soviet bloc nation entered into deals to buy up to 40 percent of its natural gas from three U.S. LNG producers: Venture Global LNG of Virginia, Cheniere Energy of Houston and now, Sempra Energy — to diversify its supply.

“People don’t just want the lowest price,” Martin said. “Folks like Poland want supply security. They want to know that they can sign a contract with people who are creditworthy, who understand the significance of that relationship as one of our top allies and that they can count on that supply being available. Price is part of the equation but security of supply is another part of that equation.”