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Sempra LNG Louisiana terminal operational by August

Fri Mar 27, 2009 1:49am GMT, LOS ANGELES, March 26 (Reuters) - Sempra Energy’s (SRE.N) liquefied natural gas (LNG) terminal in Louisiana is likely to be operational by August after getting its first cargo around the end of May, company officials said in an analysts conference on Thursday.

“We think we will get the first cooldown cargo at the end of May,” Neal Schmale, Sempra president and chief operating officer, told analysts.

That cargo will be used. in essence, to prime the terminal for full operation. It will take up to 60 days for testing and cooling down the three storage tanks that will receive supercooled LNG before the Cameron LNG terminal will be operational, Schmale said.

“Then the plant will go into operations,” Schmale said.

Schmale and Mark Snell, Sempra vice president and chief financial officer, pegged operations for Cameron to begin in August.

Forty percent of the terminal’s 1.5 billion cubic feet per day capacity is booked, in a 600 million cubic feet per day (bcfd) contract with gas major Eni (ENI.MI) in a 20-year deal.

Schmale said he can’t say whether there will be many spot cargo deals into Cameron once it becomes operational, as there are 900 million bcf spare after the space allotted for Eni.

Schmale said the evolution of the LNG market, which has already switched from point-to-point to a global network, may change again away from 20- and 30-year contact commitments to five- to 10-year deals.

“That will be fine” with Sempra, he added.

He said suppliers of LNG are going to want more flexibility, and receivers like Sempra must be willing to respond.

“In volatile international flows, it is an advantage to the suppliers to market to multiple countries, and the receiving capacity of the world should exceed the generation capacity,” Schmale said.

Demand for LNG has dropped recently as South Korea and Japan have not picked up spot cargoes. But when the global economy recovers, it is fully expected that demand will rise again, Schmale said.

Even as demand is down, about 95 million tonnes of new LNG production capacity is expected to come on-line in the next two years, likely bringing a glut of product.

MEXICO EXPANSION

Last year, Sempra LNG brought on line its 1 bcfd Energia Costa Azul terminal in Baja California in Mexico. LNG from that terminal is fully contracted for 20 years in contacts with Shell (RDSa.L) and BP’s (BP.L) Tangguh LNG project in Indonesia.

The Sempra LNG plant in Mexico is the only one on the North American Pacific Coast. Schmale hinted that it is more likely that when the market in the U.S. West needs it, Costa Azul will be expanded before a new plant is placed on the U.S. coast.

“Believe me, expanding in Mexico will be much easier than a greenfield site in the United States,” he said.

Most of the LNG that is imported to the United States will arrive in the Gulf Coast, which has pipelines that feed most of the U.S. demand, Schmale said. (Reporting by Bernie Woodall; Editing by Gary Hill)