LNG EXPORT ROUTES: Sempra Energy plans to ship LNG from three 
U.S. terminals to markets in Asia and Europe

LNG EXPORT ROUTES: Sempra Energy plans to ship LNG from three U.S. terminals to markets in Asia and Europe

The Chinese government’s new schedule of tariffs should be no concern for San Diego’s Sempra Energy, according to at least one industry analyst.

Sempra (NYSE: SRE) is getting into the business of exporting liquefied natural gas, or LNG. China is expected to be a big importer in future years. However, the U.S.-China trade war seems to complicate the plans of U.S. companies planning to serve the China market. China announced in mid-September that it is placing a 10 percent tariff on liquefied natural gas, or LNG, effective Sept. 24.

“China tariffs won’t impact Sempra,” said Shahriar Pourezza, an analyst with Guggenheim Securities LLC, noting that Sempra is concentrating on other markets. South Korea, Japan, Poland, India and France are the countries that will buy Sempra’s exports, the analyst said. Guggenheim does business with Sempra; Pourezza rated Sempra stock as a Buy, setting a $127 price target in an Aug. 6 research note following the company’s latest earnings report. Sempra shares closed Sept. 27 at $111.06.

A Reuters report from Sept. 18 struck a different note, saying the Chinese tariff will hit plans to build new terminals being developed by Sempra, Cheniere Energy and Kinder Morgan.

Could Affect “Second Wave“

The tariff may affect the ability of U.S. companies to finance a so-called “second wave” of LNG export plants on the Gulf Coast, wrote Forbes columnist Jude Clemente of JTC Energy Research.

A Sempra LNG spokeswoman confirmed that the company was monitoring the China tariff situation but declined comment for this story, referring an inquiry to LNG Allies, an industry group in Washington, D.C.

LNG Allies CEO Fred Hutchison declined to comment on Sempra’s situation, but said the U.S. and China must resolve their trade differences.

Sempra laid out its LNG plan as part of a major investor presentation on June 28. LNG is “a clear priority for us,” Joe Householder, president and chief operating officer, said at the time.

LNG plants chill natural gas, such as that from Texas’ Permian basin, to very low temperatures. The concentrated gas is then loaded on specialized ships, which transport it to customers across oceans.

Sempra and its partners are building a major LNG export facility in Cameron Parish, Louisiana. The facility’s three production lines — called trains — are expected to be producing LNG by 2019, a spokeswoman said.

Planning More Export Facilities

Beyond that, the San Diego-based corporation plans to start construction on two more LNG export facilities — in Port Arthur, Texas, and Baja California. It has also proposed adding two more trains to the Cameron plant once it is finished.

In its June presentation, Sempra told investors that its three sites will be able to export low-cost U.S. LNG to markets in East Asia, India and Europe. LNG plants are expected to replace coal and nuclear plants. Worldwide LNG demand is expected to outpace supply by the mid-2020s, Sempra said in its analyst presentation.

The 10 percent tariff China placed on LNG imports from the United States shifted the escalating U.S.-China trade war to the energy markets. China had threatened a 25 percent tariff.

In the 12 months leading up to June, China was the second largest buyer of LNG from the United States, said Giles Farrer, research director at the Wood Mackenzie oil and gas consulting firm. Shell was the largest seller.

In a statement issued by Wood Mackenzie, Farrer said he sees the tariff affecting future LNG export projects: “For the long-term market, the consequences are likely to be felt on new supply developments,” he wrote. “It restricts the target market for developers of new U.S. LNG projects trying to sign new long-term contracts. However there is still plenty of appetite for second-wave U.S. LNG projects from other buyers in Asia and Europe.”

China’s Options for LNG

China has other options to import LNG. Russia and Australia are potential sources, according to analysts.

Hutchison, CEO of LNG Allies, called for the two superpowers to go to the bargaining table.