Sempra sees LNG supply deal with BP by end of August
Thursday, July 22 2004 - 01:37 AM WIB
The two companies signed a nonbinding agreement for a 20-year supply with index-based pricing in December. The gas will come from the planned Tangguh LNG liquefaction facility in Indonesia, which is being built by a consortium led by BP.
"BP and the Indonesian government have said they want a deal by the end of August, and I see no reason why that shouldn't happen," Sempra President Don Felsinger said on Tuesday in an interview in NewYork.
Cargoes are expected to start arriving at the Costa Azul terminal in Mexico in 2007, when the facility is to become operational. The facility will be able to process 1 billion cubic feet a day.
Sempra is also in talks to line up suppliers for its Cameron LNG facility at Hackberry, La., expected on line in 2007 as well, Felsinger said. That terminal will be able to process 1.5 billion cubic feet a day.
"We haven't said who we are negotiating with at Cameron, but we hope to reach a conclusion some time this year on that," Felsinger said.
Declining domestic supplies of natural gas in the U.S., the world's biggest consumer, have set off a global building boom for LNG, which is seen as critical to filling a looming supply gap.
Sempra will work with its suppliers to ensure the company's projects are timed to come on line when they can be assured continuous deliveries of LNG, Felsinger said. That means, for example, that if a project involves building three storage tanks, Sempra may wait to build one or two until supplies can be assured for them, he said.
"We want to make sure our construction parallels the construction upstream of liquefaction facilities," Felsinger said.
LNG shipments from new projects won't start to come in steadily until 2008, Felsinger said.
"There's no doubt that in 2007, that's going to be the year that new supplies start to come on line," Felsinger said. "It will probably not be dependable supplies, because they'll be going through startup. In 2008 and beyond is when we'll start seeing new projects delivering at new capacity."
For its Costa Azul project, Sempra had originally planned to buy gas from Bolivia, but the plan fell apart last year due to violent protests in that country over planned gas exports.
This past weekend, however, Bolivian voters supported a referendum to allow the government to export its gas. Getting gas from Bolivia "makes a lot of sense," because of its proximity to the U.S. marketplace, Felsinger said.
"Bolivia is about one-third the distance of some other countries that export, which diminishes costs," Felsinger said. "At some point in time, that gas has to go someplace, because it's of no value in the ground."
Sempra recently notified federal regulators of plans to build a third LNG receiving terminal at Port Arthur, Texas, that could process 1.5 billion cubic feet a day. It would cost about $600 million to build and is slated to be operational in 2009.
The company believes it has a good chance of getting siting approval from the Federal Energy Regulatory Commission and has had preliminary talks with suppliers, Felsinger said.
"Thus far, the community has been very supportive of that facility in Texas," Felsinger said.
Companies trying to site LNG facilities in Massachusetts, California and Alabama have run into strong community opposition, fueled in part by fears of terrorism.
Sempra has no immediate plans for a fourth LNG terminal, though the company is always thinking about areas where it may make sense, Felsinger said. The Gulf Coast makes the most sense for terminals because it has supportive infrastructure in place already, he said.
Sempra's also looking at storage and pipeline projects, he said.
"There's a lot of pipeline infrastructure needed to get LNG to the marketplace, so we have several line projects in the works," Felsinger said. "Another thing we are looking at is LNG storage."(*)