Sempra Energy SRE recently finalized an engineering, procurement and construction (EPC) contract with Bechtel Corporation for its proposed Port Arthur LNG liquification project. In June 2018, Sempra chose Bechtel as its EPC contractor for the aforementioned project. The recent agreement will facilitate Sempra in making a final investment decision by the third quarter of 2020.
Considering the increase in U.S. liquefied natural gas (LNG) exports, the latest contract should expand Sempra’s share in the concerned market.
Sempra Energy & LNG
Sempra’s business segment, Sempra LNG develops and builds natural gas liquefaction facilities and is pursuing the development of five strategically located LNG projects in North America, Port Arthur being one of them. Through these developments, the company aims at delivering natural gas to the largest world markets.
In this regard, from 2020 through 2024, Sempra LNG and its joint venture with IEnova expect to make capital expenditures and investments of approximately $2.4 billion.
In recent times, steady growth in U.S. natural gas exports has been witnessed, with increased LNG exports being the key catalyst. Per a report by the U.S. Energy Information Administration (EIA), U.S. LNG exports averaged 5 billion cubic feet per day (Bcf/d) in 2019, 2 Bcf/d more than in 2018, as a result of several new facilities that placed their first trains in service.
We believe these trends are indicative of the increasing demand for LNG worldwide, backed by the global transition toward clean energy. The emissions are much lower than coal. Such demand growth must have encouraged Sempra to expand its LNG portfolio.
EIA expects U.S. LNG exports to continue to grow and average 6.5 Bcf/d in 2020 and 7.7 Bcf/d in 2021, as facilities gradually ramp up to full production. Sempra will certainly play an important role in the nation achieving this target, with the second and third trains of its Cameron LNG facility set to come in service this year.
The latest progress in the Port Arthur facility, following the EPS contract signing, along with the proposed expansion of its Cameron LNG facility up to two additional trains, will further boost Sempra’s footprint in the U.S. LNG market.
To reap the benefits of this booming market, other companies operating in the LNG market are also expanding their portfolio. Chevron CVX added 494 million barrels of oil-equivalent in proved reserves in 2019, primarily from LNG projects in Australia and deepwater assets in the Gulf of Mexico.
ExxonMobil XOM through its affiliates and LNG joint ventures produces 23 MTA of LNG globally and delivers to 30 countries. Cheniere CQP is among the leading companies in North America strategically pursuing the development, construction and operation of LNG terminals. Since its start, nearly 1000 cumulative cargoes of LNG originating from Cheniere have been delivered to 35 markets worldwide.
Shares of Sempra Energy have rallied 25.7% in the past 12 months compared with the industry’s growth of 8.2%.
Sempra Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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