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Sempra Energy has ambitions to become the top U.S. liquefied natural gas producer, the company’s chief executive told Reuters.
Sempra has five LNG projects under development right now, in Louisiana, Texas, and Mexico, that together will have the capacity to produce 45 million tons of LNG. That’s more than what Cheniere Energy, the current leader in this space, plans to have in terms of capacity at its two LNG plants in Sabine Pass and Corpus Christi.
Eventually, Sempra could become the second-largest LNG supplier in the United States if and when Cheniere builds its small-scale LNG trains now at the planning stage.
“We are going to move aggressively to unlock these five projects over the next three to five years,” CEO Jeff Martin told Reuters, noting the expected jump in LNG demand resulting from a large-scale shift from coal to cleaner fossil fuels.
U.S. LNG capacity could reach a daily processing rate of 8.8 billion cu ft this year and rise further to 10.1 billion cu ft daily in 2020, from 3.8 billion cu ft daily in 2018. However, all this is contingent on the companies behind the projects securing long-term contracts with buyers.
For now, this is challenging because of the price situation: LNG prices have fallen substantially over the past 12 months after a surge in new supply with two large-scale projects in Australia starting production last year. As a result, buyers are preferring to buy their LNG on spot markets rather than opt for long-term contracts that could end up being costlier.
LNG projects cost billions of dollars to build and are often accompanied by cost overruns and delays. Companies with activities in the area need debt financing to go ahead with their plans, and lenders are a lot more willing to dispense the cash when they see long-term commitments from buyers.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.