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Sempra continues testing Aliso Canyon, pursuing bigger LNG dreams

Sempra Energyis weathering uncertainty for new and old infrastructure alike, companyofficials told analysts during a July 19 presentation in New York City.

More than five months after utility subsidiary sealed off a breached well at the Aliso Canyon storage facility, the field'sother 114 wells are still undergoing testing, SoCalGas President and CEO DennisArriola said during the company's July 19 analyst day. The company hascompleted the first phase of state-mandated well and has moved onto the secondphase, which involves a more detailed assessment of each .

"We're making good progress there," Arriola said. "Ican tell you that everyone on-site — all of the regulators, all of theinspectors, all of the outside consultants, everybody — is focused on gettingthis facility up and running as quickly but as safely as practical."

Injections into the wells are banned until theinfrastructure has been fully inspected and approved by the California PublicUtilities Commission and California Department of Conservation's Division ofOil, Gas and Geothermal Resources. Arriola said he expects that SoCalGas "willhave some wells ready for injection … in September or later this summer."

The state investigation into the multi-month Aliso Canyongas leak is still underway, and Arriola said the company expects an answerabout the root cause by the end of this year or the beginning of 2017.

Sempra expects to make insurance claims of more than $700million related to the Aliso Canyon situation, Arriola said, but he emphasizedthat the company has insurance coverage in excess of $1 billion.

Turning to newer facilities, Sempra LNG and MidstreamPresident Octávio Simões acknowledged that overzealous interest in developingLNG export projects coupled with low oil prices have thrown the global LNGmarketplace for a loop. But Sempra still sees opportunity opening up toward theend of the decade.

With the first three Cameron LNG LLC trains halfway completeand a recent U.S. Department of Energy authorizationfor expansion, Sempra is confident in its export prospects, he noted.

The projected gap between contracted and uncontracted LNGdemand is slated to widen over time, reaching roughly 125 million tonnesannually by 2020, he said.

"We share the view that the market is currentlyoversupplied [and] low oil prices have created the collapse of LNG prices …because of the linkage that those contracts have," Simões said. "Alot of end-users are not comfortable with what's going on, so they're sitting alittle bit on the fence, but we see that as an opportunity."

Consumers increasingly are looking for improved contractflexibility with respect to both volume and destination, and U.S. exporters —including Sempra — can accommodate those needs, he said. With strong domesticdemand, fluctuations in demand overseas are not as problematic for would-be LNGexporters, he noted.

"You can release the pipeline transportation and notsuffer an economic impact," he said.

The company plans to have the first three trains online inabout 2018, with the first year of full production being 2019, and Sempra isalso looking into how best to connect the planned additional trains to gassupplies, Simões said.

The DOE on July 18 authorized Sempra to export an tocountries that do not have a free-trade agreement with the U.S., increasingCameron LNG's authorized export capacity to 3.53 Bcf/d for a 20 year period.

The company is considering a host of options — includingpotential acquisitions, greenfield pipeline projects, system looping optionsand expansions — to be able to adequately feed the extra Cameron LNG trains, hesaid.

"We're looking at … anything that can actually deliverthe gas, where we think it's needed for the lowest possible cost and also offerthat operational flexibility that's key for LNG," Simões noted.