Sempra launches Port Arthur LNG project
Published by Callum O'Reilly,
Sempra has announced that its 70%-owned subsidiary, Sempra Infrastructure Partners LP (Sempra Infrastructure), has reached a positive final investment decision (FID) for the development, construction and operation of the Port Arthur LNG Phase 1 project in Jefferson County, Texas, US.
Sempra Infrastructure closed its joint venture with an affiliate of ConocoPhillips, as well as announced an agreement to sell an indirect, non-controlling interest in the project to an infrastructure fund managed by KKR. Additionally, Sempra Infrastructure announced the closing of the project's US$6.8 billion non-recourse debt financing and the issuance of the final notice to proceed under the project's engineering, procurement and construction agreement.
"At Sempra, we believe bold, forward-looking partnerships will be central to solving the world's energy security and decarbonisation challenges," said Jeffrey W. Martin, Chairman and Chief Executive Officer of Sempra. "With strong customers, top-tier equity sponsors in ConocoPhillips and KKR and a world class contractor in Bechtel, this project has the potential to become one of America's most significant energy infrastructure investments over time, while creating jobs and spurring continued economic growth across Texas and the Gulf Coast region."
"Sempra's selection of Port Arthur as the location for a new natural gas liquefication and export terminal is a strategic decision that will cement Texas' position as the energy capital of the world," said Texas Gov. Greg Abbott. "With a highly skilled workforce and business-friendly climate, and as a national leader in LNG exports, Texas is the prime location to expand LNG operations to unleash the United States' full economic potential in such a critical industry. Expanding LNG is imperative to American energy security, and the State of Texas looks forward to working alongside Sempra to advance this mission and bring more jobs and greater opportunities to hardworking Texans."
The Port Arthur LNG Phase 1 project is fully permitted and is designed to include two natural gas liquefaction trains, two LNG storage tanks and associated facilities with a nameplate capacity of approximately 13 million tpy. Total CAPEX for the Port Arthur Phase 1 project is estimated at US$13 billion.
The long-term contractable capacity of approximately 10.5 million tpy is fully subscribed under binding long-term agreements with strong counterparties -ConocoPhillips, RWE Supply and Trading, PKN ORLEN S.A., INEOS and ENGIE S.A., all of which became effective upon reaching FID. Sempra Infrastructure is also actively marketing and developing the competitively positioned Port Arthur LNG Phase 2 project, which is expected to have similar offtake capacity to Phase 1.
Sempra and ConocoPhillips closed their joint venture (JV) whereby an affiliate of ConocoPhillips has acquired a 30% non-controlling interest in the project, is purchasing 5 million tpy of LNG offtake from the project under a 20-year sale and purchase agreement (SPA) and is managing the project's overall natural gas supply requirements. ConocoPhillips will also have certain rights to participate in future expansion projects in both equity and offtake.
"Our strategic LNG partnership with Sempra will help supply growing global demand for natural gas, a lower greenhouse gas emissions-intensity fuel expected to play a critical role in the energy transition and global energy mix going forward," said Ryan Lance, ConocoPhillips Chairman and Chief Executive Officer. "ConocoPhillips has more than 60 years of experience with LNG, and we look forward to continuing to build our LNG portfolio and expanding our role in delivering a lower-carbon future that strengthens U.S. and global energy security."
Sempra Infrastructure announced an agreement whereby KKR will acquire a 25% to 49% indirect, non-controlling interest in the Port Arthur LNG Phase 1 project. Pursuant to the agreement with KKR, Sempra Infrastructure will retain certain economic and other rights with respect to the interest being transferred while granting KKR certain minority interest protections. KKR is making the investment primarily through its Global Infrastructure Investors IV fund.
"We are pleased to invest in this critical energy infrastructure project and extend our strategic partnership with Sempra and their world-class team," said James Cunningham, Partner at KKR. "Phase 1 will create new jobs, support American economic growth and deliver reliable and cleaner energy during the global energy transition. Consistent with KKR Infrastructure's strategy of seeking stable and predictable returns for investors, our investment in Phase 1 is backed by robust cash flows through long-term contracts with high-quality counterparties."
Sempra Infrastructure is targeting 20% to 30% of indirect ownership interest in the project, subject to the closing of the KKR sale.
Sempra Infrastructure has contracted with global engineering, construction and project management firm Bechtel Energy Inc. and has issued a final notice to proceed for the project. The expected commercial operation dates for Train 1 and Train 2 are 2027 and 2028, respectively.
"We're proud to partner with Sempra to deliver a world-class LNG facility. Building from mature, scalable energy technologies helps safeguard our energy supplies and promote the transition to lower-carbon energy," said Brendan Bechtel, Chairman and CEO of Bechtel. "Bechtel has a record of delivering LNG infrastructure on the US Gulf Coast and bringing quality jobs and training opportunities to local communities. The 5000 construction jobs this project creates will provide outstanding opportunities for craft professionals - growing a skilled workforce that will benefit the region for years to come."
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/21032023/sempra-launches-port-arthur-lng-project/
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