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Sempra reaches final investment decision on Port Arthur LNG export project

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Sempra reaches final investment decision on Port Arthur LNG export project


First phase to have 13 million mt/year production capacity

Sempra finalizes joint venture deal with ConocoPhillips

Announces new equity deal with KKR

  • Author
  • Corey Paul
  • Editor
  • Richard Rubin
  • Commodity
  • LNG Natural Gas

Sempra announced a positive final investment decision March 20 on its second US liquefaction facility -- the 13 million mt/year first phase of its Port Arthur LNG export project in Texas -- on the back of strong global interest in securing US volumes.

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Sempra said it had closed on $6.8 billion in debt financing and had issued a final notice to proceed under its engineering, procurement and construction contract with Bechtel. The developer also said it finalized a deal with ConocoPhillips for a 30% equity stake in the project and reached a new equity agreement for an infrastructure fund managed by KKR to acquire a 25% to 49% non-controlling interest in the project. Sempra said it was targeting a 20% to 30% ownership interest in the project, pending the closing of the sale to KKR.

"This project has the potential to become one of America's most significant energy infrastructure investments over time," Sempra CEO Jeffrey Martin said in a statement.

ConocoPhillips agreed in November 2022 to a 20-year agreement to offtake 5 million mt/year, along with taking the equity stake and managing the feedgas supply requirement for Port Arthur.

The estimated $13 billion first phase of Port Arthur includes two liquefaction trains, two LNG storage tanks and associated facilities. Sempra said its expected commercial operations dates for Train 1 and Train 2 were 2027 and 2028, respectively.

Sempra already operates the Cameron LNG export terminal in Louisiana, where the developer is planning a 6.75 million mt/year expansion that it has said it could commercially sanction later in 2023.

The FID for Port Arthur, which Sempra had said for months that it expected to announce by the end of March, marked the second US liquefaction project to get commercially sanctioned in 2023. US exporter Venture Global announced an FID March 13 on the second phase of its 20 million mt/year Plaquemines LNG project in Louisiana.

US LNG developers have benefitted from a wave of commercial activity over the past year tied to US supplies, which offer destination flexibility and the relative stability of long-term contracts with fixed liquefaction fees. Long-term deals covering more than 58 million mt/year of US LNG have been announced over the past year as supply concerns mounted over Russia's war in Ukraine.

Sempra, which has been one of the more successful LNG developers in terms of lining up long-term deals with European counterparties over the past year, secured long-deals for Port Arthur covering a total 10.5 million mt/year with counterparties including ConocoPhillips, chemicals group Ineos, France's Engie, Germany's RWE and Poland's PKN Orlen.

Sempra has said a key part of its strategy was not committing to the pricing of offtake before the refresh of its EPC contract with Bechtel, announced in October 2022. The amended EPC contract included a price of around $10.5 billion for building the first phase of Port Arthur, up from about $8.9 billion in 2020. A similarly sized Port Arthur LNG Phase 2 project is under development.