Sempra to make decision on Mexico Costa Azul LNG export plant this year

FILE PHOTO: Sempra Energy headquarters is pictured in downtown San Diego, California, U.S., May 17, 2018. REUTERS/Mike Blake

(Reuters) - U.S. energy company Sempra Energy SRE.N said Thursday it still expects to get an export permit from Mexico soon that will allow it to make a final investment decision this year to build its proposed Costa Azul liquefied natural gas export plant.

Sempra has been waiting for that 20-year export permit all year. It was held up in part by the coronavirus.

Sempra LNG and Infraestructura Energética Nova SAB de CV (IEnova) IENOVA.MX, Sempra Energy's subsidiary in Mexico, will build the plant, expected to cost about $1.9 billion, at the existing Costa Azul LNG import plant, which entered service in 2008.

The export plant already has 20-year agreements with units of Mitsui & Co Ltd 8031.T and Total SE TOTF.PA for the purchase of about 2.5 million tonnes per annum (MTPA) of LNG, equivalent to around 0.3 billion cubic feet per day (bcfd) of natural gas, from the project's first phase.

Costa Azul’s Pacific Coast location gives it an advantage over competing U.S. Gulf Coast export plants because it is closer to growing Asian markets. U.S. plants usually ship LNG to Asia through the Panama Canal.

Investment demand for LNG has run high for several years due to heavy consumption mostly from Asian countries to meet rising energy demand and diversify fuel sources away from dirty coal toward cleaner gas and renewables.

This year, however, oil and gas companies around the world pushed back decisions to build new LNG terminals after the coronavirus caused global energy demand and prices to collapse.

At the start of 2020, a dozen or so North American LNG developers said they planned to make final investment decisions to build projects by the end of this year. Currently, however, that total is down to just two, and some analysts said they expect only Costa Azul to actually go forward this year.

Reporting by Scott DiSavino; Editing by Steve Orlofsky