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Highlights

Execs pushing to add capacity to project at Mexico terminal

Start of feedgas flow to Louisiana facility said to be imminent

Houston — Sempra Energy is considering renegotiating regasification contracts at a Mexican terminal where it wants to add liquefaction capabilities to allow a potential increase in the LNG export capacity currently envisioned there, executives said Wednesday.

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The effort reflects the San Diego-based utility and energy infrastructure developer's confidence in the direction of commercial talks it is having with potential offtakers to support the LNG project at Energia Costa Azul in Baja California. It also is building market interest in a proposed export terminal in Texas and a second phase at the Louisiana terminal where it is preparing to start up its first train.

During a day-long series of investor presentations, executives said they head into next week's LNG2019 industry conference in China with momentum toward signing new long-term deals with buyers, in part because of the recent uptick in contracting activity across the market and the proximity of its West Coast site to Asian demand centers.

"The time to capitalize on this opportunity is right now," said Justin Bird, president of Sempra LNG.

In November, Sempra reached preliminary agreements with offtakers that, if finalized, would cover all of the liquefaction capacity for the first phase of the export project at Energia Coast Azul. It said at the time that the heads of agreement with affiliates of France's Total and Japan's Mitsui and Tokyo Gas put it on target to make a final investment decision on the project by late this year.

Talks have since picked up, and now Sempra is eyeing possibly expanding beyond the up to 15 million mt/year of capacity proposed for the two-phase project.

Bird said that officials were trying to see if the developer can add additional trains at the site or work with regasification customers to try to terminate contracts early. He said Phase 1 of the export project was proposed because it could co-exist with existing regasification contracts. Phase 2, as originally designed, could not co-exist with the existing regas contracts that expire in 2028, he said.

"I have challenged the team to see if we could get more capacity out of the project," Bird said.

Sempra is also involved in a proposed export project in Port Arthur, Texas. As with Energia Costa Azul, a final investment decision has yet to be reached at Port Arthur. Bird said Sempra sees potential expansion opportunities at that site too, and is working with counterparties to sign offtake deals. Meetings are planned at the conference in Shanghai, which starts Monday.

Meanwhile, Sempra said during the webcast investor presentations that feedgas introduction was imminent at its Cameron LNG export terminal in Louisiana. It reiterated that production was expected to begin in the second quarter, followed by the first export.

The $10 billion project -- a joint venture of affiliates of Sempra, Total, Mitsui and a company jointly owned by Japan's Mitsubishi and NYK - has faced a series of delays.

FUTURE OUTLOOK

With the project back on track, executives are talking about the possibility of further expansion there, too. Chief Financial Officer Trevor Mihalik said the company was raising its expected annual earnings from Cameron LNG at full implementation by about $30 million.

He said the mix of equity arrangements with partners and long-term contracts with creditworthy offtakers that supported the construction of Cameron LNG is the right formula as Sempra looks to advance its other two LNG export projects.

"I really believe we have a good handle on how we are going to finance this going forward," Mihalik said.

-- Harry Weber, Harry.Weber@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com