INTERVIEW: Sempra may seek export extension for Cameron LNG expansion amid US DOE policy shift

Sempra might need to seek an extension from US Department of Energy of its export authorization for a proposed expansion of its Cameron LNG export terminal in Louisiana -- a regulatory process that carries new risks for US projects after the DOE's recent tightening of its policy on extending export licenses.

The 6.75 million mt/year Cameron expansion faces a May 2026 deadline to start exports under its current authorization, issued in 2020, a shorter timeline than the four years or so that it traditionally takes to construct major LNG export projects.

But Sempra believes its work to advance the expansion will be enough to convince the regulator to extend the license, Dan Brouillette, president of Sempra's infrastructure unit and a former US energy secretary, told S&P Global Commodity Insights in a June 10 interview at the LNG2023 conference in Vancouver, British Columbia.

"We are working hard to show them the commercial viability of that particular project," Brouillette said. "We think it's there, so it's just a matter of getting them to agree with us that that's the case, and then at some point we'll file for an extension if we have to."

Whether Sempra applies for the extension "just really depends on how fast we can get to an FID," Brouillette said.

Sempra entered into a heads of agreement last year to develop the project with its original partners in Cameron LNG: affiliates of France's TotalEnergies, Japan's Mitsui & Co. and a company jointly owned by Japan's Mitsubishi and Nippon Yusen Kabushiki Kaisha. Sempra, which would have just over half of the fourth train production capacity and a quarter of the debottlenecking capacity, expects that its partners would sell their share of the project volumes.

"We are so unique in many respects in the marketplace in that the developers are in fact the offtakers -- Total, Mitsui, Mitsubishi, us," Brouillette said. "I remain optimistic that we can distinguish the Cameron Train 4 expansion, if we need the extension at all, from any other folks who apply."

DOE policy shift

But Brouillette was critical of the new DOE policy, saying "I don't think it added clarity to the regulatory process."

Under the policy change, the DOE said it will no longer consider applications for extensions unless an applicant can show it has "physically commenced construction" and that it faced "extenuating circumstances outside of its control" in failing to meet the agency's deadline for beginning exports. Otherwise, developers can apply for a new export authorization.

The DOE said the policy change would increase transparency for the LNG market and argued that an overhang of authorized export volumes was becoming "increasingly disruptive" for the agency and creating uncertainty for the market.

The same day the DOE rolled out the policy, April 21, the agency denied an extension request for Energy Tranfer's Lake Charles LNG project in Louisiana. The agency said the decision was not a direct result of the policy change but consistent with the new approach. DOE upheld its decision in June, after Energy Transfer had warned the denial of an extension would "likely result in the demise of the project." Energy Transfer said it planned to continue to develop Lake Charles project.

"For some folks, it was very clear that they were going to get to denied," Brouillette. "For others, who were trying to figure out where the DOE was on LNG, I don't think it added clarity to that question. Because they have a two-prong test but were very clear that even if you meet the two prongs, you are not guaranteed to get a permit, or an extension."

"That opaqueness doesn't help these projects move forward," Brouillette continued. "The bankers, as you know, they want to see certainty. They want to see that you have permits in hand or that you have a clear path to a permit. That policy decision probably didn't help that."

Sempra's growth projects

Sempra said in May that it would consider spending more time up front on the Cameron LNG expansion to reduce costs and project risks, suggesting a delay to a targeted final investment decision this year.

Sempra has already commercially sanctioned one LNG export project in 2023 -- the 13.5 million mt/year first phase of the Port Arthur project in Texas. The developer is working to advance a second similarly sized phase of Port Arthur along with the Cameron expansion.

"There is that much demand in the market place for the natural gas that would come from these facilities," Brouillette said.