Port Arthur LNG Terminal

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Port Arthur LNG Terminal is a proposed LNG export terminal in Texas, United States. The first phase reached FID in March 2023 and is under construction.

Location

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Project details

Phase I

• Owner: Port Arthur LNG Phase I, LLC; PALNG Common Facilities Company, LLC
• Parent company: KKR [42%]; ConocoPhillips [30%]; Sempra Energy [28%]
• Location: Port Arthur, Texas, United States
• Coordinates: 29.81166342, -93.95962882 (approximate)
• Capacity: 13.5 mtpa
• Cost: US$13 billion
  • Formerly US$10.5 billion
  • Formerly US$8-9 billion
• Financing: JPMorgan Chase is the project's Financial Advisor
• Status: Construction
• FID Status: FID (2023)
• Type: Export
• Trains: 2
• Start Year: 2027 (Train 1), 2028 (Train 2)
  • Formerly Expected 2023

Phase II

• Owner: Port Arthur LNG Phase II, LLC; PALNG Common Facilities Company, LLC
• Parent: Sempra Energy; ConocoPhillips*

• Location: Port Arthur, Texas, United States
• Coordinates: 29.81166342, -93.95962882 (approximate)
• Capacity: 13.5 mtpa
• Status: Proposed
• FID Status: Pre-FID (2024)
• Cost: US$2 billion
• Type: Export
• Trains: 2
• Start Year:
  • Formerly Expected 2023

As of September 2023, Sempra Energy is presumed to be the only parent company in Port Arthur LNG Phase II, LLC, according to the submitted FERC application. Note: KKR is a stakeholder in Sempra Energy's Sempra Infrastructure Partners.

Background

Port Arthur LNG Terminal is a proposed LNG terminal in Texas, United States. The proposed export facility received approval from the US Department of Energy to export LNG to Free Trade Agreement (FTA) countries in August of 2015. The project expects to receive Federal Energy Regulatory Commission approval and Department of Energy non-FTA authorization in mid 2018, with operation in 2023.

The original proposal was only for Phase I, which included 2 trains with a total of 13.5 million tonnes per year (mtpa) production capacity. Eventually, Phase II was proposed for an additional 2 trains and another 13.5 million tonnes per year (mtpa) production capacity. This brings the proposal to 4 trains with a total of 27 mtpa.

In April of 2019, the U.S. Federal Energy Regulatory Commission (FERC) approved the construction of Phase I of the Port Arthur Terminal.

In May of 2019, Sempra Energy got approval to export LNG to countries that do not have a free-trade agreement with the U.S. The approval to export to non-free trade agreement countries is necessary for American LNG operators that want to tap into Asian markets.

In June of 2019, Sempra Energy asked FERC to approve a significant expansion of the associated pipeline that would boost the export capacity.

Also in May of 2019, Saudi Aramco agreed to a buy a stake in Sempra Energy's Port Arthur LNG export terminal, giving the world's biggest oil exporter a foothold in the U.S. gas trade. The proposed deal, which also includes an agreement to buy gas from the plant, would mark Aramco's first entry into production of oil or gas outside Saudi Arabia. Aramco can potentially ship the LNG home to the kingdom’s power plants or trade it globally. The state-owned company and Sempra signed a preliminary agreement to acquire a 25% stake in the plant, but didn't disclose the value of the potential deal.

In March of 2020, Sempra Energy selected Bechtel for the engineering, procurement, and construction (EPC) of the Port Arthur LNG export terminal in Houston, Texas. At the same time, the company pulled back from its previous intention to reach FID in the third quarter of 2020 owing to unfavourable LNG market conditions which have been exacerbated by the coronavirus pandemic.

In April 2020, FERC released its environmental review schedule for Phase II, and expects to issue its official Environmental Assessment on January 15, 2021. Other federal agencies with jurisdiction over the project will have until April 15, 2021 to complete their review.

The final investment decision (FID) for the project was originally expected in 2020, but in May 2020 Sempra announced that they were delaying the decision until 2021.

In September 2020, Bloomberg reported that Saudi Aramco's mooted acquisition of a 25% stake in the Port Arthur project was under review by the company as it looked to cut back on its capital expenditure as a result of increasing pressure for it to deliver on its US$75 billion annual dividend commitment to shareholders. It was reported that Saudi Aramco had withdrawn some staff members from the project.

In April, 2021, Sempra said it had agreed to sell a 20% interest in its Sempra Infrastructure Partners unit to private equity firm KKR & Co. Inc. for US$3.37 billion in cash.

On an investor call in May 2021, Sempra's Chief Financial Officer Trevor Mihalik said that, owing to commercial challenges, the company was further delaying FID for the Port Arthur project to 2022.

In June 2021, Sempra disclosed that it had mutually agreed with Saudi Aramco to let expire their preliminary agreement from 2019 which was intended to see Saudi Aramco take a 25% stake in the project and offtake 5 million mtpa of supply from the terminal. This decision was likely to impact the timeline for reaching FID. The supply and purchase agreement which Sempra made with Poland's PGNiG in 2018 has also been terminated. Sempra has said that the expansion of its Cameron LNG Terminal, predicted to reach FID by the end of 2022, is now more of a priority than Port Arthur, which suggests that FID for the project has now been pushed out to 2023 at the earliest.

Local community group Port Arthur Community Action Network (PACAN) has raised around ten different points with the Texas Commission on Environmental Quality (TCEQ) over Sempra's request for air emission permits for phase 2 of the terminal project. In August 2021, PACAN succeeded in gaining an additional hearing after TCEQ officials asked to learn more about their concerns. The scale of the project and the emissions it could create are thought to have influenced certain of the officials to opt for additional time and effort to further consider the permitting process.

In August 2022, the sponsors requested an extension from FERC to build the facilities through June, 2028. The extension was approved in October.

In October 2022, Port Arthur LNG and Rio Grande LNG Terminal issued limited notices to proceed with construction.

In March 2023, Sempra took FID on Port Arthur Phase 1 and issued a final notice to proceed to EPC contractor Bechtel Energy. According to GIIGNL's accounting as of the release of its 2023 global report, 10.5 mtpa of the Phase 1 output is contracted on a long-term basis with ConocoPhillips, RWE Supply and Trading, PKN ORLEN, INEOS and ENGIE. The same month, KKR agreed to purchase an equity stake between 25 and 49%, although this was not yet finalized. Baker Hughes was awarded the contract to supply LNG trains for the project.

In August 2023, Sempra said that it expected to take FID on Port Arthur Phase 2 in 2024 along with an expansion of Cameron LNG Terminal.

In September 2023, FERC authorized Port Arthur's Phase 2.

In November 2023, the U.S. Court of Appeals for the Fifth Circuit revoked the emissions permit for Port Arthur LNG, citing its failure to impose the same emissions limits as on other LNG projects. Sempra said that construction, currently in the site preparation phase, would continue. John Beard, executive director of the Port Arthur Community Action Network, which had brought the lawsuit, said, “We’ve won by standing up for Port Arthur communities of color to breathe free from toxic pollution. When attacked, we fight back – and win!”

In February 2024, a unit of Sempra and the Japan Bank for International Cooperation (JBIC) entered a memorandum of understanding (MOU) to cooperate on LNG, hydrogen, and other decarbonization efforts.

In March 2024, Sempra held a groundbreaking ceremony for the offical start of construction of the project. Site preparation activities had been occurring for the past year.

Contracts

In December 2018, Port Arthur LNG, LLC and the Polish Oil & Gas Company (PGNiG) announced they had agreed on a 20-year sale-and-purchase agreement for supply of LNG. The agreement is for the sale and purchase of 2 Mtpa, or approximately 2.7 billion cubic meters per year. Sempra Energy said this was enough natural gas to meet approximately 15% of Poland's daily needs. The agreement is dependent on Port Arthur LNG making a final investment decision (FID).

In June 2021, Sempra disclosed that it had mutually agreed with Saudi Aramco to let expire their preliminary agreement from 2019 which was intended to see Saudi Aramco take a 25% stake in the project and offtake 5 million mtpa of supply from the terminal. The supply and purchase agreement which Sempra made with Poland's PGNiG in 2018 has also been terminated.

In July 2021, PGNiG terminated its 20-year contract to purchase LNG from Sempra citing the project's delays.

In May 2022, PGNiG returned to Sempra to sign a 20-year non-binding heads of agreement (HOA) for about 1 mtpa of LNG from the facility. Sempra also signed an HOA with RWE Supply & Trading under which it may purchase 2.25 mtpa of LNG.

In June 2022, Britain's INEOS Energy signed a 20-year sales and purchase agreement under which it would purchase 1.4 mtpa from either Sempra's Port Arthur LNG Phase 1 or Cameron LNG Terminal Phase 2 projects.

In July 2022, ConocoPhillips signed a Heads of Agreement (HOA) with Sempra under which it would acquire 5 mtpa of the fuel produced by Phase 1, supplying gas for its share of the output, and take a 30% stake in Phase 1 of the project.

In November 2022, Williams signed an HOA with Sempra to purchase 3 mtpa from Port Arthur Phase 1 and Cameron LNG Terminal Phase 2.

In December 2022, Sempra and INEOS signed an SPA for 1.4 mtpa of LNG over 20 years from Port Arthur Phase 1, along with an HOA for a further long-term purchase of 0.2 mtpa from Phase 2 if it is built. The same Month. Engie agreed to an SPA for 0.875 mtpa LNG for 15 years delivered of a free-on-board (FOB) basis. Sempra and Germany's RWE Supply & Trading also announced an SPA for the purchase of 2.25 mtpa of LNG over 15 years, following up on an HOA signed in May 2022.

In January 2023, Poland's PKN Orlen agreed to an SPA to purchase 1 mtpa on a FOB basis from the project for a duration of 20 years.

In June 2024, Saudi Aramco signed an HOA with Sempra to purchase 5 mtpa over a 20-year timeframe from Port Arthur LNG's second phase.

Ownership

In September 2023, Sempra sold 42% of Port Arthur LNG Phase 1, LLC to KKR. Sempra retained a 28% controlling interest.