San Diego's Fortune 500 energy giant Sempra will add another major project to its roster of facilities that ship liquefied natural gas, or LNG, to destinations around the world.
The infrastructure subsidiary of Sempra announced Monday afternoon that it will proceed with the construction of the first phase of Port Arthur LNG, a $13 billion project on the Gulf Coast of Texas.
"At Sempra, we believe bold, forward-looking partnerships will be central to solving the world's energy security and decarbonization challenges," Jeffrey Martin, Sempra's CEO, said in a statement.
In recent years, Sempra has become a big player in the global LNG market.
Sempra Infrastructure is already the majority owner of Cameron LNG, a $10.5 billion facility on the coast of Louisiana that opened in August 2020.
The company is also building an export component to an already existing LNG terminal near Ensenada, Mexico, called Energía Costa Azul, that is expected to be completed by mid-2025. In addition, the company is working with the Mexican government to build another LNG export facility in the port city of Topolobampo on the Gulf of California.
The Port Arthur project has been in the works for years and has obtained all the necessary federal, state and local permits. Sempra Infrastructure said Monday it has finalized $6.8 billion in financing to move forward with the project. Betchel Energy Inc. will build the facility.
Phase 1 of the project is designed to include two large storage tanks and two production units — called "trains" in the parlance of the LNG business — that are expected to begin commercial operations in 2027 and 2028, respectively.
Port Arthur LNG expects to handle 13 million metric tons per year of nameplate capacity. Of that amount, 10.5 million metric tons have already been contracted. Long-term agreements have been signed with ConocoPhillips, as well as RWE Supply and Trading of Germany, PKN Orlen of Poland, INEOS of Great Britain and Engie of France.
Russia's invasion of Ukraine has made LNG from the U.S. much more attractive to Europe.
Prior to the war, Russia's state-owned natural gas company, Gazprom, supplied about 40 percent of the gas that heated European homes and powers businesses. In the past year, European markets have scrambled to make deals with LNG exporters in other countries.
"We really think there is a strategic advantage at Port Arthur," Martin told utility analysts during a earnings call last November. "We've got 3,000 acres of frontage on the waterway there, roughly three miles of access to water."
Martin said Port Arthur has the potential to manage as many as eight trains of natural gas.
In the LNG process, export facilities take natural gas via pipelines and cool it to minus 260 degrees Fahrenheit. They then load the liquefied gas onto specially made cargo tanks on double-hulled ships that take the LNG to international destinations — in particular to markets keen on replacing coal with natural gas.
Environmental groups are opposed to LNG exports, saying they extend the world's dependence on fossil fuels. While natural gas burns twice as clean as coal, methane can leak from pipelines, well sites and other infrastructure. Methane is about 30 times more potent than CO2 when released into the atmosphere.
"The bottom line is that liquid natural gas is fracked methane, which is obviously a fossil fuel and expanding fracked methane will intensify carbon pollution in the atmosphere and this project is not a decarbonization strategy," said Masada Disenhouse, executive director of SanDiego350.
"Port Arthur, Texas, is already one of the most polluted cities in the U.S. ... and this project will just increase the air pollution that these local residents are breathing in every day."
Port Arthur LNG will be a joint venture of Sempra Infrastructure and ConocoPhillips, which has acquired a 30 percent stake and will manage the facility's natural gas supply requirements. Under a 20-year agreement, ConocoPhillips has also purchased 5 million metric tons per year of LNG offtake from the project.
Sempra also announced Monday that KKR, a New York-based global investment firm, agreed to acquire a 25 to 49 percent non-controlling interest in Phase 1 of Port Arthur LNG. Completing the KKR sale is contingent on regulatory approvals and other customary closing conditions.
"Phase 1 will create new jobs, support American economic growth and deliver reliable and cleaner energy during the global energy transition," KKR partner James Cunningham said in a statement.
Sempra said it is actively looking to market Phase 2 of the project, which the company anticipates will have about the same offtake capacity as Phase 1's 13 million metric tons per year.
