Sempra is betting on substantial growth in global LNG demand over the coming years despite regulatory uncertainty over the future of U.S. exports, management said.
CEO Jeffrey Martin hosted a conference call to discuss first quarter 2024 earnings for the San Diego, CA-based energy firm.
Through its Sempra Infrastructure unit, the company has nearly 40 million metric tons/year (mmty) of liquefied natural gas export projects under development, including on the U.S. Gulf Coast and Mexico’s Pacific Coast.
The company is “supporting global demand for energy security…in the midst of a second wave of LNG developments expected to support over 700 mmty of demand by 2050,” said Martin. “Our dual coast LNG strategy is contributing to this push with approximately 16 mmty of new export capacity currently under construction, which would more than double our existing LNG operating footprint.”
He said Sempra’s growth forecasts for LNG are based solely on projects that have reached final investment decision (FID) and are under construction, “and doesn’t yet include expected upside from a series of other projects still in development.”
Construction of the Energía Costa Azul (ECA) LNG Phase 1 in Mexico and Port Arthur LNG Phase 1 in South Texas remain on schedule, Sempra management said. ECA Phase 1 is expected to start commercial operation in summer 2025. Trains 1 and 2 and Port Arthur LNG Phase 1 would start in 2027 and 2028, respectively.
Sempra also is planning a second phase of Port Arthur and an expansion of the existing Cameron terminal, though FID has not been reached.
In Mexico, Sempra also has plans to expand ECA beyond the initial first phase, and to sanction the Vista Pacifico terminal in partnership with state power utility Comisión Federal de Electricidad (CFE).
DOE Pause Not Impacting Confidence
CFO Karen Sedgwick downplayed the potential impacts of the U.S. Department of Energy’s (DOE) pause on new approvals for LNG export projects targeting non-free trade agreement (FTA) countries.
“The LNG market is long-term by nature, and while the DOE pause has received a lot of press, we remain confident in our ability to deliver projects that offer long-term, secure and cleaner energy to customers,” Sedgwick said. “Sempra Infrastructure benefits from experienced project development teams that continue to make progress on critical work streams, including permitting, engineering and commercial negotiations.
“Moreover, the…pause has not impacted our confidence in the overall competitive positioning of our development projects, and we’re strategically utilizing this time to steadily advance our opportunities.”
She added, “even if you only take into consideration projects that have reached FID, Sempra Infrastructure has incredible built-in growth. With 16 mmty of LNG export facilities, associated infrastructure and a new wind project under construction, we’re improving visibility to attractive earnings growth through the end of our planning period in 2028.”
Martin reiterated that the DOE pause “only really impacts Port Arthur Phase 2. We already have existing Department of Energy non-FTA permits for Cameron Phase 1, which is in operation, ECA Phase 1 and Port Arthur Phase 1, both of which are in construction, as well as Cameron Phase 2, ECA Phase 2 and Vista Pacifico.”
Martin highlighted Sempra’s bi-coastal approach to LNG development, saying, “There’s no other developer out there that has the opportunity to directly access Asia and also dispatch into the Atlantic through the Gulf.”
Sempra is aiming to sanction the Cameron expansion in the first half of 2025, and has not yet set a target date to sanction Port Arthur Phase 2.
Demand ‘Super-Cycle’
On the home front, Martin said, “We’re seeing strong macroeconomic fundamentals supporting U.S. energy demand with the economy continuing to grow at a steady pace with manufacturing production gains, easing of supply-chain constraints and continued job creation. We’ve previously discussed the view that our industry is experiencing a super-cycle of growth and believe Sempra’s strategy and portfolio are well-positioned to benefit from current trends.”
The CEO continued, “In addition to the long-term demand from reshoring and electrification of transportation, artificial intelligence and data centers are driving new growth in digital infrastructure with demand estimates tripling from 2.5% of total U.S. electric consumption to 7.5% by 2030.”
He cited Texas as a “particularly remarkable” example of energy demand growth. He noted that the Electric Reliability Council of Texas, aka ERCOT, recently raised its forecasted peak demand by the end of the decade to more than 150 GW. This would be some 65 GW higher than the state’s current all-time record, Martin noted.
Sempra reported net income of $881 million ($1.27/share) for the first quarter of 2024, compared to $1.17 billion ($1.54) in 1Q2023.
