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Sempra pushing forward Mexican LNG projects with solid govt backing

Bnamericas Published: Friday, May 06, 2022
Sempra pushing forward Mexican LNG projects with solid govt backing

Executives of San Diego-based Sempra Energy gave an update of a raft of projects focused on LNG in Mexico during a 1Q22 results call with investors. 

Sempra CEO Jeff Martin gave new details of projects under development in the country, including Energía Costa Azul (ECA) Phase 1 and Phase 2 in Baja California state, as well as the Vista Pacífico project for the Topolobampo liquid fuels marine terminal in Sinaloa state, both on the Pacific coast. 

While Martin said executing a final investment decision on ECA Phase 1 was now Sempra’s “top priority” among all projects, he said the Mexican government is also eager to advance with Vista Pacífico.

“We’re really excited about both ECA Phase 1 and Vista Pacífico. They both really leverage the same common resource of Permian gas, and we have a straight shot [through] the pipeline systems to support Vista Pacífico,” said Martin. 

During a dinner last month between Martin, Mexican President Andrés Manuel López Obrador (AMLO) and US clean energy envoy and former senator John Kerry, he said the main topic discussed “was how we can move Vista Pacífico along at a faster pace.”

“In Mexico, they understand the value of being able to export natural resources, particularly high-sulfur oil, but they also want to ensure that they raise their marquee status as an exporter of LNG,” said Martin.

AMLO's administration has come under fire in recent times for its insistence on expanding use of hydrocarbons for power generation, but the view of natural gas as the cleanest alternative in the hydrocarbon space has fueled the government’s desire to back projects in this area, as well as showing particular interest in LNG. 

Martin added, “I’m pleased with the type of support we have across the government inside of Mexico to support that project going forward.”

Being built at the existing Energía Costa Azul LNG regasification facility (pictured), ECA Phase 1 is set to be the first Pacific coast LNG export project with direct access to abundant natural gas supplies in Texas and the Western US as a single-train liquefaction facility with a nameplate capacity of 3.25Mt/y (million tons per year) of LNG and an initial offtake capacity of approximately 2.5Mt/y of LNG.

An ancillary ECA Phase 2 project is also in early development and targeted to bring an additional 12Mt/y in export capacity.

IENOVA ABSORBED  

The ECA projects, formerly developed under Sempra’s then-subsidiary IEnova, were moved under Sempra Infrastructure (SI) with IEnova’s consolidation into SI in 2021. 

SI is one of three companies now under the Sempra banner, along with Sempra Texas and Sempra California. 

SI, headed by Justin Bird, has operations in both the US and Mexico with a strong emphasis on building out its LNG export platform on the Pacific coastline. 

PROJECT BREAKDOWN

Bird offered a breakdown of SI’s projects, starting with ECA Phase one, saying the brownfield project just south of San Diego in Mexican territory was “on time and on budget” to begin LNG production by end-2024.

Moving to Vista Pacífico, a number of MoUs were recently announced for the 3-4Mt/y project, including a deal with state-owned Mexican power utility CFE to develop the project jointly, and in April SI signed a separate MoU on Vista Pacífico with France’s TotalEnergies. 

Bird said Vista Pacífico is “still an early-stage project, but has a strong competitive advantage as the Pacific outlet [for] US natural gas to Asia.”  

He added that the MoU with Total is a “broadening of our strategic alliance”. With Vista Pacífico, Total is also “looking at one-third of the project off-take and potentially a minority equity stake.” A completion date has not been set.

Bird said of ECA Phase 2, “We think this is a project that will make sense and we’re working on looking at the opportunities there to bring in gas and to optimize it to the design of that project.”

Among other projects listed in the presentation, Sempra is commissioning work on the Topolobampo refined fuels terminal with the commercial operation date (COD) set in the second half of 2022.

The expansion of the Gasoducto Rosarito (GRO) pipeline, tied to ECA Phase 1, is under construction with a COD of 1H24.

Sempra also listed two Mexican renewable projects still under development: the 300MW Cimarrón PV project in Sonora for export to California and the “up to 500MW” Volta de Mexicali (VDM) energy storage project, also intended to export clean power to the US.

1Q22 RESULTS

Sempra reported US$924mn in net income adjusted for one-off events during 1Q22, up from US$900mn in the same quarter of 2021,

The company also reported that revenues reached US$3.82bn in January-March, compared with US$3.26bn in 1Q21.

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