Sempra shifts target for permit, investment decision for Mexico LNG project

Houston — As another target for advancing Sempra Energy's proposed Mexican gas liquefaction project was about to come and go, the company stretched out its timeline again.

The company is now "optimistic" it will receive government export authorization and make a final investment decision "this year," spokeswoman Paty Ortega Mitchell said Sept. 29 in an email to S&P Global Platts in response to questions.

The end of the third quarter, Sept. 30, had been the company's most recent goal for getting the permit, based on comments by CEO Jeffrey Martin during an August investor call. That was a delay from a previous target of mid-April, set in late February.

In a year filled with delays and market uncertainty for North American LNG developers due largely to demand destruction as a result of the coronavirus pandemic, the export project at Energia Costa Azul on Mexico's Pacific Coast was seen as having the best chance to move forward in 2020. It already has firm long-term offtake contracts covering the 2.5 million mt/year first phase of the project and a $1.5 billion engineering, procurement and construction contract with Technip that protects it from cost overruns. But the export permit remained pending.

"We continue to have an active dialogue with the Mexican government for the long-term export permit for ECA LNG," Ortega Mitchell said.

During the most recent investor call, Martin blamed the novelty of the permit – with Sempra seeking the first permit that would be issued that authorizes the export of hydrocarbons from Mexico by a private entity. He also called attention to the challenges the pandemic has posed to Mexico's economy and government offices.

"The conversations remain quite positive. And I'm optimistic that we'll get the permit later in Q3," Martin said at the time.

At the Energía Costa Azul project site in Mexico, there is currently a regasification terminal. If the liquefaction project moves forward, Phase 1 calls for a one-train export facility. Feedgas would be shipped to the site from the US via pipeline. A second phase would be designed for 12 million mt/year of offtake.

One snag could involve a plan Mexico has been considering to liquefy excess natural gas imported from the US and export it itself to Asia and Latin America, as Mexican power plants slated to run on that gas were never built. The move could create a regional hub that would directly compete with Sempra's project. Sempra also faces a dispute involving reservation fees at the regasification facility.

San Diego-based Sempra is making a bold play for a significant share of the North American LNG export market, with a goal of ultimately raising the site's capacity to about 45 million mt/year and rivaling the dominance of the current biggest US player – Cheniere Energy.

Besides the proposed ECA export project, Sempra is majority owner of the three-train Cameron LNG facility in Louisiana.

Outage continues

Cameron LNG's trains have been offline since Aug. 26, a day before Hurricane Laura came ashore on the US Gulf Coast packing winds up to 150 mph.

Small feedgas deliveries were observed flowing to the facility for the third day in a row Sept. 29. But LNG production has not yet resumed. Spokeswoman Anya McInnis said feedgas flows would fluctuate as the terminal works through the startup process for its first train. It could be several more weeks before full operations resume.

In May, Sempra delayed until 2021 a final investment decision on whether to build the proposed 11 million mt/year Port Arthur LNG export facility in Texas. The postponement came amid challenges developers have faced in securing sufficient commercial agreements with buyers of US supplies. Those challenges have been exacerbated by the pandemic, although market conditions have continued to improve in recent weeks.