Costa Azul LNG Terminal

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Costa Azul LNG Terminal is an LNG terminal in Baja California, Mexico. It was originally built as an import terminal but is currently being converted into an export terminal.

Location

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Project Details (Import Terminal)

• Operator: IEnova
• Owner: Sempra Energy*
• Parent: Sempra Energy
• Location: Ensenada, Ensenada, Baja California, Mexico
• Coordinates: 31.988557, -116.846466 (exact)
• Capacity: 7.6 mtpa
• Additional Proposed Capacity:
• Status: Operating
• Type: Import
• Start Year: 2008

*Note: KKR is a stakeholder in Sempra Energy's Sempra Infrastructure Partners

mtpa = million tonnes per year; bcfd = billion cubic feet per day

Project Details (Export Terminal)

Project Details, Export Terminal Phase 1

• Owner: Sempra/IEnova (83.4%), Total (16.6%)
• Location: Ensenada, Ensenada, Baja, Mexico
• Coordinates: 31.988557, -116.846466 (exact)
• Trains: 1
• Capacity: 3.25 mtpa
• Status: Construction
• Type: Export
• Start Year: 2026

*Note: KKR is a stakeholder in Sempra Energy's Sempra Infrastructure Partners

Project Details, Export Terminal Phase 2

• Owner: Sempra/IEnova (83.4%),Total (16.6%)*
• Location: Ensenada, Ensenada, Baja, Mexico
• Coordinates: 31.988557, -116.846466 (exact)
• Trains: 2
• Capacity: 12 mtpa
• Status: Proposed
• Start Year:

*Note: KKR is a stakeholder in Sempra Energy's Sempra Infrastructure Partners

mtpa = million tonnes per year; bcfd = billion cubic feet per day

Background (Import Terminal)

Costa Azul LNG Terminal comprises a sea port and natural gas processing center, located 15 miles north of Ensenada, Baja California, Mexico. The project was launched in 2005 and began commercial operations in May 2008 as the first liquefied natural gas (LNG) terminal on North America's Pacific coast, with the capacity to process and regasify up to one billion cubic feet of natural gas per day. LNG carrier ships capable of holding up to 220,000m³ of LNG can dock in the deep water port off the coast to unload LNG. Natural gas from the terminal is used to produce electricity and is fed by pipelines to factories. The terminal also supplies a 78-kilometer spur pipeline that runs north to connect with the Rosarito Gas Pipeline near the Mexico-United States border. Sempra Energy is a partner in the port with PEMEX. The 210,000m³ Al Safliya, transporting LNG from Qatar, was the first ship to dock and unload at the Costa Azul terminal. Mexico's other Pacific coast LNG terminal is the Manzanillo LNG Terminal in Manzanillo, Colima state.

In 2015 Sempra Energy began considering plans to convert the import terminal into a natural gas liquefaction and export facility.

Background (Export Terminal)

The proposed export terminal was originally announced as a joint venture between Sempra Energy and its subsidiary Infraestructura Energetica Nova SAB de CV (IENOVA). Plans called for the terminal to be built in two phases, with natural gas to be sourced from Texas, Wyoming, Utah and/or New Mexico. The proposed second phase reportedly was to require construction of a new pipeline from the Permian Basin or elsewhere in the western US.

In April 2020, Sempra announced that it would postpone a final investment decision (FID) on its new Costa Azul terminal, pending Mexican government approval of the project's 20-year export license. Sempra placed the investment cost of the proposed project at US$1.9 billion. As of August 2020, Sempra said it was still waiting to receive the required export permit from the Mexican government. Reuters subsequently reported that the Mexican government was looking to tie the awarding of the project's export permit to a requirement for Sempra's local subsidiary IENOVA to build the Vista Pacifico LNG Terminal - a separate LNG export facility in the port of Topolobampo on the Gulf of California - in order to help Mexico unload excess gas capacity.

In November 2020, Sempra Energy announced that it had reached a Final Investment Decision (FID) for Phase 1 of the Costa Azul export terminal, reportedly the only FID for any LNG terminal in 2020. In announcing the FID, Sempra confirmed that it had already negotiated definitive 20-year sale and purchase agreements with Mitsui & Co., Ltd. and Total SE for a combined total of 2.5 Mtpa of LNG, ensuring reliable markets for the bulk of Phase 1's LNG production. The announcement placed the capital expenditures for ECA LNG Phase 1 at approximately US$2 billion, which was to be funded with "a combination of equity contributions and debt." First LNG production from ECA LNG Phase 1 was expected in late 2024.

In November 2020, Sempra and IEnova authorized TechnipFMC to proceed with engineering, procurement, and construction for the new export terminal.

In December 2020, Total took a 16.6% equity stake in the project, with Sempra Energy and its local unit Infraestructura Energetica Nova (IEnova) each retaining 41.7% ownership.

In December 2022, the US Department of Energy approved permits allowing Sempra to export US natural gas to Mexico for liquefaction at its Costa Azul and Vista Pacífico LNG terminals and onward shipment to non-FTA countries through December 2050. Sempra had been making the case that additional international gas supply was crucial in the wake of Russia's February 2022 invasion of Ukraine.

By July 2023, construction of the terminal was said to be 60% complete, with LNG exports expected to begin on schedule in 2025.

In a May 2024 earnings call, Sempra Energy's CEO Jeffrey Martin confirmed that construction of Phase 1 of the export terminal was on track to begin commercial operation by summer 2025.

However, in August 2024, with construction of the terminal 85% complete, Sempra reported that the project had suffered delays and cost increases due to labor and productivity challenges. Reports indicated that initial LNG production would be pushed back from late 2024 into 2025, with full commercial operation and initial delivery to customers now anticipated for spring 2026, presumably just in time to meet the "export commencement deadline" of March 29, 2026 stipulated by the US Department of Energy.

As of September 2024, Sempra Energy's website focused exclusively on Phase 1 of the Costa Azul export terminal, without any reference to Phase 2. However, the company's most recent quarterly report (August 2024) continued to list Phase 2 as an active project in the development phase, with a capacity of ~12 mtpa.

Financing

A final investment decision (FID) for the initial phase of the export facility, with estimated costs of US$2 billion, was reached in November 2020, after Costa Azul became the first LNG terminal in Mexico to receive an export permit from the government. Financial close was reached for the LNG export terminal in December 2020. On the equity side, Sempra Energy and Total are together investing US$733 million. Debt financing of US$1.58 billion is being provided by a consortium of private banks comprising Banamex, BBVA, Mizuho, Natixis, Scotiabank and Sumitomo Mitsui Banking Corporation.

Opposition

Numerous citizens' groups in Mexico, including Greenpeace, Nuestro Futuro, Alianza Mexicana Contra el Fracking, Conexiones Climáticas and Planeteando have called for the government to cancel all pending LNG export terminal projects in the country. The groups argue that LNG terminals create a host of serious negative impacts for local communities, including health effects from toxic chemicals such as benzine and nitrogen oxides, climate change associated with heightened levels of greenhouse gas emissions, devastation of marine life due to dredging, and the associated negative economic impacts on fisheries.

Articles and resources

External articles

Costa Azul LNG Terminal, Wikipedia, accessed November 2017