Total SA's expanded LNG partnership with Sempra Energy boosts the chances for an expansion of the Cameron LNG export plant in Louisiana and another gas export venture in Mexico, analysts said.
The companies on Nov. 5 announced the signing a memorandum of understanding that signaled Total's plans to invest in a two-train expansion of Cameron LNG. Total also said it wants to partner in converting Sempra's Energía Costa Azul import terminal on the West Coast of Mexico in Baja California into an export facility. The French supermajor, which already owns a stake in the first phase of Cameron LNG, could also end up buying up to 9 million tonnes per annum of LNG from the new projects.
Total's involvement "would certainly seem to increase odds of [final investment decisions] for these projects given they now have an outlet for the volumes," Morningstar analyst Allen Good said in an email.
As a major trader of LNG that can shift volumes around its portfolio, Total could also help circumvent near-term issues caused by the U.S.-China trade dispute, Good said. China placed a 10% tariff on U.S. LNG in September.
"Total is well known; they have a lot of LNG projects globally. They've got relationships with the customers, and a lot of foreign companies, they'll be a lot more comfortable dealing with a global name like Total," said Muhammed Ghulam, an analyst with Raymond James. "All else equal, it's a positive. But how big of a positive, it's still a question mark."
The $10 billion first phase of the Cameron LNG export project is in the commissioning process. After delays, the first three liquefaction trains with a combined export capacity of about 14 mtpa are expected to come online in 2019.
Total acquired a 16.6% equity stake in the Cameron LNG export terminal when it acquired ENGIE SA's upstream LNG assets. That acquisition also made Total the second largest LNG player in the world.
The second phase of the Cameron LNG project would expand the facility's capacity through the addition of two liquefaction trains and up to two LNG storage tanks with about 9 mtpa of capacity. Energía Costa Azul's first phase would include one liquefaction train with an export capacity of 2.5 mtpa. A second phase is expected to add 12 mtpa. It would be supplied with natural gas from the U.S.
Sempra CEO Jeffrey Martin said the company has a long-term goal of developing more than 45 mtpa of LNG export capacity in North America. "That is why our relationship with Total is so important," Martin said in a statement. "We plan to leverage the competitive strengths of both companies to accelerate development of North American LNG exports to global markets."
For Total, Chairman and CEO Patrick Pouyanné said the agreement would help the supermajor diversify its portfolio of LNG supply options and offer customers flexibility, reliability and low-cost North American gas.
"We are pleased to collaborate with Sempra Energy and the other Cameron LNG co-owners to extend the Cameron LNG project and to further enhance its competitiveness, but also participate in the development of export capacity on the West Coast of Mexico, which will benefit from synergies with existing infrastructure and from a significant shipping cost advantage for customers in Asia," Pouyanné said.
Total's ultimate participation remains subject to finalizing definitive agreements and other uncertainties, the companies said. Those include "obtaining binding customer commitments," regulatory approval, and financing, along with reaching a final investment decision.
"It's important not to assume that projects are going to be built, especially with LNG, until we have something concrete," Ghulam said. "And it doesn't look like we have a lot that's concrete today."
