Sempra and Sempra Infrastructure’s management discussed the Port Arthur LNG project during Sempra’s first-quarter earnings call on Friday.
Bechtel is currently building the first phase of the Port Arthur LNG export terminal with a capacity of some 13 mtpa under an EPC deal worth about $10.5 billion.
The development of the proposed second phase would increase the total liquefaction capacity of the facility to about 26 mtpa.
Earlier this year, Sempra said it expects to take FID on the second phase in 2025.
Sempra Infrastructure previously won approval from the US FERC for the proposed Phase 2 project, and it also secured the FTA approval from the DOE.
DOE still needs to approve Sempra Infrastructure’s non-FTA application for the project.
Sempra Infrastructure and Bechtel recently confirmed that an incident took place at the Port Arthur LNG construction site in Texas, resulting in three fatalities and two injuries.
“I’d like to take a moment to acknowledge the safety incidents that occurred last week at the Port Arthur facility, which has resulted in the loss of three Bechtel employees,” Karen Sedgwick, Sempra’s executive VP and CFO, said during the call.
“Our deepest condolences go out to the families and colleagues affected by this incident,” she said.
Tariff impact
Sedgwick said that Port Arthur construction has progressed, including the foundations, steel and pipe installations, dredging activities, and major equipment setting.
“Also, on the tariff front, Port Arthur LNG began admitting all items and the designated foreign trade zones into the United States as a preemptive action back in February to avoid higher costs being levied on these items,” she said.
“Earlier this year, we announced that we expected to take on Port Arthur LNG Phase 2 by the end of 2025. That remains our target as we’re continuing to field strong commercial interest in the project,” Sedgwick said.
“With that said, uncertainty and the macroeconomic environment may affect the timing of project development,” she said.
“As we have done in the past, we’ll continue to exercise patience as we seek to mitigate cost risk and lock in favorable long-term economics,” she said.
Managing cost risks
Later during the call, Justin Bird, CEO of Sempra Infrastructure, answered a question about the macro uncertainty potentially impacting project development on Port Arthur 2.
“We’re very pleased with the strong commercial interest in that project and the progress we’re making on the development front. Those include commercial negotiations, receiving our final permits, and financing the project,” Bird said.
“Karen mentioned some of the recent macroeconomic uncertainties, and I think for us it’s important to emphasize we’re committed to managing cost risks and maintaining discipline to achieve our targeted returns. And that will take precedent over the timing of any announcements,” he said.
“I also just want to remind folks of the point Karen and Jeff have made, the priorities reflected in Sempra’s capital program are focused on growing regulated utilities, and that means we’ll only take FID on a project like Port Arthur Phase 2 when we’re comfortable it will deliver strong shareholder value,” Bird said.
