Sempra reaches FID for Port Arthur LNG

Sempra Infrastructure, a subsidiary of Sempra, 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.

Courtesy of Sempra Infrastructure

On 20 March, Sempra revealed reaching the FID and closing its joint venture with an affiliate of ConocoPhillips as well as an agreement to sell an indirect, non-controlling interest in the project to an infrastructure fund managed by KKR.

According to the company, upon closing the joint venture, an affiliate of ConocoPhillips has acquired a 30% non-controlling interest in the project, is purchasing 5 million tonnes per annum (mtpa) of LNG offtake from the project under a 20-year sale and purchase agreement 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.

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Furthermore, 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.

Sempra Infrastructure said it is targeting 20% to 30% of indirect ownership interest in the project, subject to the closing of the KKR sale.

Additionally, the company announced the closing of the project’s $6.8 billion non-recourse debt financing and the issuance of the final notice to proceed under the project’s engineering, procurement and construction (EPC) agreement with Bechtel Energy.

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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 mtpa. The expected commercial operation dates for Train 1 and Train 2 are 2027 and 2028, respectively.

Total capital expenditures for the Port Arthur Phase 1 project are estimated at $13 billion.

The long-term contractable capacity of approximately 10.5 mtpa is fully subscribed under binding long-term agreements with ConocoPhillips, RWE Supply and Trading, PKN ORLEN, INEOS and ENGIE, all of which became effective upon reaching FID.

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Sempra Infrastructure is also actively marketing and developing the competitively positioned Port Arthur LNG Phase 2 project, which is expected to have a similar offtake capacity to Phase 1.

Commenting on the launch of the project, Jeffrey W. Martin, Chairman and CEO of Sempra, said: “At Sempra, we believe bold, forward-looking partnerships will be central to solving the world’s energy security and decarbonisation challenges.

“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.”

Texas Gov. Greg Abbott added: “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.

“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.”