Energy Dialogues Interviews Octávio Simões, President and CEO of Sempra LNG & Midstream
The North American Gas Forum is just around the corner. In advance of the event, we spoke with NAGF speaker, President and CEO of Sempra LNG & Midstream, Octávio Simões, about the conversations that will take place this October in Washington D.C.
Octávio has more than 38 years of experience across the global energy industry, and has served as an energy executive, consultant, and project manager, along with many other pivotal roles.
This addition to our exclusive interview series provides a high-level overview of Sempra LNG & Midstream’s current goals, the organization’s five-year plan, and a discussion around how business has been impacted by policies related to LNG and midstream.
ED: Sempra LNG & Midstream develops, builds, and invests in liquified natural gas facilities and natural gas pipelines and storage. Could you give us a holistic global view of Sempra LNG & Midstream’s major projects that are currently underway?
OS: We’re in the process of completing the construction of Cameron LNG in Hackberry, Louisiana. That’s a thirteen and a half million-ton facility with three trains. The facility output is fully sold to Mitsubishi, Mitsui and Total. And we expect all three trains to be producing LNG in 2019, so that’s well on its way to bringing LNG to market. We also have an expansion at that facility fully permitted at FERC and at DOE, both FTA and non-FTA, for two additional trains. Once the partners decide to move that expansion forward, this will bring another nine million tons of LNG to the market. Just as a reference, the equity owners of Cameron are Sempra, Mitsubishi, Mitsui, NYK and Total. So that’s Cameron.
We’re also in the process of developing the Port Arthur facility in Port Arthur, Texas. The first phase should be two trains for about 12 million tons per year of LNG production. We are in the permitting phase. FERC has provided the notice of schedule that should have us receiving the FERC permit in the beginning of the year. For offtake, we’ve announced a long-term agreement with KOGAS of Korea and PGNiG, The Polish National Utility. We also selected Bechtel as the EPC partner for the facility.
We are targeting to have a final investment decision by the end of 2019, which means we would have LNG on the market in 2023. This project also has the possibility for expansion to a number of other trains. Right now, we’re obviously focusing on getting the base project off the ground.
In addition, we have a regasification terminal in Baja, California – the Energia Costa Azul. That facility is currently contracted to Shell, Gazprom and to Sempra itself. We have a supply arrangement with the Tangguh partners in Indonesia for 3.7 million tons and we’re looking to develop a couple of liquefaction options at Costa Azul. One would be a mid-scale project, about two and a half to three million tons, that could go off right away and get to the market faster. FID would be in 2019 and LNG in 2023. We’re also looking at a large-scale project that’s fully permitted in Mexico for about 12 million tons. We could focus on the large-scale project, or potentially start with the small scale project and then later expand to the larger scale. We’re in the process of deciding all that at the moment.
Since around 2008, we’ve been the largest buyer of LNG at Tangguh, accounting for about 50 percent of the output. That’s a 20-year contract that expires in 2028. We’re present in all the segments of the value chain except the exploration and production of gas.
We also have Midstream in our group. We can provide services and assets in terms of pipelines, underground storage, gas management, and gas procurement to make sure the liquefaction facilities operate reliably. And for the most part, this provides the whole picture of what Sempra LNG & Midstream comprises at the moment.
ED: What does Sempra’s five-year plan look like as it pertains to growth in the LNG market?
OS: We want to get Cameron fully constructed and delivering LNG to the market in the 2019-2020 timeframe. We want to take FID in Port Arthur in 2019 and if we decide to go with the mid-scale at Costa Azul, then to take FID for that project in 2019 as well. That’s a smaller project. Then, we would like to continue the development of the Cameron expansion. Since we have partners in the Cameron expansion, that’s a joint decision so I’m not able to comment on how that would work. It’s a great opportunity, and we intend to explore it since it’s an existing facility. Our five-year plan is to execute on these projects, bring them to market, and remain a reliable supplier to the world of LNG.
ED: How is Sempra LNG & Midstream prioritizing technological advancement to align with your current goals?
OS: In terms of technology, we try to always be optimizing. We do a lot of value engineering. We did that a lot after Cameron for Port Arthur. We had spent a year doing value engineering where we improve certain arrangements of components, along with the introduction of other elements, to make the trains as efficient, productive and as low-cost as possible. We look at construction methods that may reduce costs in execution, and that’s what we’ll continue to pursue. Liquefaction is not necessarily a technology that is in its infancy. It’s a very well-established technology. The advancements are all in execution and design improvements that have to do with making processes more efficient and help drive a lower cost per unit of LNG.
ED: What is Sempra’s role in sustainable and renewable energy?
OS: We have a completely different division within Sempra, Sempra Renewables, that has been very active in both solar and wind. As you may have seen in the news, we are currently in the process of selling the Sempra Renewables business.
LNG will continue to be a major source of supply to developing countries, and to others that don’t have natural resources. This fuel is reliable and much cleaner than coal, and can actually foster the growth of renewables in those regions.
Through SoCalGas and San Diego Gas & Electric, we are involved with transmission and distribution in California, which is obviously the largest US market, and one of the largest in the world. We recently acquired Oncor in Texas, which is probably the second largest economy in the United States, and in the top ten worldwide.
Then, we’re involved in Chile, Peru, and Mexico in a number of different energy infrastructure projects. We see LNG as the ability to participate in the global gas market.
ED: Which policies are currently impacting active projects, and how is Sempra LNG & Midstream responding?
OS: One of the things that concerns us is that our projects require very large investments and permitting has taken longer than in the past. I think FERC is taking steps to fix that. We keep a very close eye on the whole permitting process. Regarding permitting for pipelines, we have a lot of gas being produced in the United States. We need to make sure that it can move efficiently around the country to support the LNG exports so that we don’t have to be in a position to flare it, or keep it in the ground, and not take full advantage of it.
Clearly, LNG plays a role in geopolitics, in terms of countries diversifying their supply. Our allies want to have diversification, rather than being captive to one country for supply. Any policy that limits our ability to maneuver and distribute LNG around the world, or that creates restrictions, is of concern to us. Any policy that limits our ability to build the facilities in the US is o f concern to us, and so we try to work with the stakeholders to make sure that those things don’t happen. And that’s essentially our focus.
ED: Being that the US has grown to be a major exporter, how has Sempra explored new partnerships created by this market opportunity?
OS: One of our companies developed electrical grid technology, which we are using in partnership with Mitsui. Because Mitsui is our LNG partner, one of their divisions was interested in this technology. As we develop in one area, we can expand those relationships to other areas. There are a couple of other things that are not public, so I’m not able to divulge at this point.
ED: Let’s talk about what you’ll be discussing at the North American Gas Forum. Can you give readers a sneak peek into what you’ll be discussing?
OS: We participate in the North American Gas Forum in Washington, D.C. because the audience is a bit different than our other LNG-focused events. In D.C., we have the opportunity to address regulators, interest groups, and other participants in the natural gas value chain. The things we’ll be talking about are the typical challenges that the natural gas industry faces, and how they relate to potential exports. At the same time, we’ll address where the industry has to do well in order to gain the confidence of the public.
ED: What do you believe will be the most controversial topic at the forum?
OS: Every year, somebody will bring something new, and that’s the value of this event. Its size allows for meaningful debate. There will be certain things that may be controversial, whether it’s methane emissions or shale exploration, etc. – you never know what the hot topic of the moment might be. Maybe people will talk about the trade wars with China; we’ll have to see.
Discuss major policy changes impacting the energy industry with Octávio Simões and many other senior industry professionals. Speak with regulators and key decision makers. The North American Gas Forum – October 2018.
The North American Gas Forum is dedicated to bringing together an impressive line-up of industry decision makers from across the natural gas value chain. The forum will be held on October 14-16 in Washington D.C. Join us for high-level discussion and debate, with topics ranging from the future of energy, to LNG project advancements, and transitional requirements of the current infrastructure.
To learn more, and to reserve your spot, please visit: http://energy-diagloues.com/nagf/