San Diego-based Fortune 500 energy giant Sempra is set to add another major project to its roster of facilities that ship liquefied natural gas (LNG) to destinations around the world.
Sempra’s infrastructure subsidiary announced Monday afternoon that it will proceed with construction of the first phase of Port Arthur LNG, a $13 billion project on the Texas Gulf Coast.
“At Sempra, we believe that bold, forward-thinking partnerships will be central to solving the world’s energy security and decarbonization challenges,” said Jeffrey Martin, CEO of Sempra, in a statement.
Sempra has developed into a big player on the global LNG market in recent years.
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Sempra Infrastructure is already the majority owner of Cameron LNG, a $10.5 billion offshore Louisiana facility that opened in August 2020.
The Company is also building an export component for an existing LNG terminal near Ensenada, Mexico called Energía Costa Azul, which is expected to be completed by mid-2025. The company is also working with the Mexican government to build another LNG export facility in the Gulf of California port city of Topolobampo.
The Port Arthur project has been in the works for years and has received all required federal, state and local permits. Sempra Infrastructure announced Monday that it has closed $6.8 billion in financing to advance the project. Betchel Energy Inc. will build the facility.
Phase 1 of the project is planned to include two large storage tanks and two production units – called “trains” in LNG business parlance – which are expected to start commercial operations in 2027 and 2028 respectively.
Port Arthur LNG expects to handle 13 million tonnes per year of nameplate capacity. Of this, 10.5 million tons have already been contracted. Long term agreements have been signed with ConocoPhillips as well as RWE Supply and Trading of Germany, PKN Orlen of Poland, INEOS of the UK and Engie of France.
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Russia’s invasion of Ukraine has made US LNG much more attractive to Europe.
Before the war, Russia’s state-owned natural gas company, Gazprom, supplied about 40 percent of the gas that heats European homes and powers businesses. Over the past year, European markets have been scrambling to strike deals with LNG exporters in other countries.
“We really believe there is a strategic advantage in Port Arthur,” Martin said during a conference call on the utilities last November. “We have 3,000 acres of waterway frontage there, about three miles of water access.”
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Martin said Port Arthur has the potential to manage up to eight natural gas trains.
In the LNG process, export facilities extract natural gas via pipelines and cool it down to minus 260 degrees Fahrenheit. They then load the liquefied gas into purpose-built cargo tanks on double-hull ships, which take the LNG to international destinations — particularly markets looking to replace coal with natural gas.
Environmental groups oppose LNG exports, saying they increase the world’s dependence on fossil fuels. While natural gas burns twice as cleanly as coal, methane can leak from pipelines, wells, and other infrastructure. Methane is about 30 times stronger than CO2 when released into the atmosphere.
“The bottom line is that liquefied natural gas is fracked methane, which is obviously a fossil fuel, and expanding fracked methane will increase carbon pollution in the atmosphere, and this project is not a decarbonization strategy,” said Masada Disenhouse, executive director of SanDiego350.
“Port Arthur, Texas is already one of the most polluted cities in the United States… and this project will only add to the air pollution these local residents breathe every day.”
Port Arthur LNG will be a joint venture between Sempra Infrastructure and ConocoPhillips, which has acquired a 30% interest, and will manage the facility’s natural gas supply needs. ConocoPhillips has also sourced 5 million tons of LNG per year from the project under a 20-year contract.
Sempra also announced Monday that KKR, a New York-based global investment firm, has agreed to acquire a non-controlling interest of 25 to 49 percent in Phase 1 of Port Arthur LNG. Completion of the KKR sale is subject to regulatory approvals and other customary closing conditions.
“Phase 1 will create new jobs, support American economic growth and provide reliable and clean energy during the global energy transition,” KKR partner James Cunningham said in a statement.
Sempra said it is actively looking to commercialize Phase 2 of the project, which the company expects will have approximately the same offtake capacity as Phase 1’s 13 million tonnes per year.
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