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    Sempra Takes Costa Azul FID


The decision for the Mexican Pacific coast plant is the first in the world this year.

by: Joe Murphy

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Sempra Takes Costa Azul FID

Sempra Energy announced on November 17 it had taken a final investment decision (FID) on the first phase of its Energia Costa Azul (ECA) LNG project on Mexico's Pacific coast. It is the first approval of new liquefaction capacity in the world this year.

The first phase will comprise a 3.25mn metric ton/year liquefaction train, with Japan's Mitsui and France's Total having committed to taking around 2.5mn mt/yr of its output under a 20-year contract. Its projected cost is $2bn, which Sempra intends to raise through equity contributions and debt. Production is slated to start in late 2024. TechnipFMC was awarded an engineering, procurement and construction contract for the project in February.

The approval follows reports in recent months that Mexico's government was willing to grant ECA LNG an export permit only if Sempra's local subsidiary IEnova committed to expanding the project's planned output, in order to utilise excess gas supply in the region. A proposed second stage would take ECA LNG's capacity up to 12mn mt/yr, Sempra has previously said.

Sempra described the project as "one of the largest private investments in the history of Baja California," noting it would "support the Mexican economy through investment, tax revenue and jobs. "The project is also expected to positively impact the local community through social investment programmes as well as help position Mexico as a key player in the global trade of natural gas," it said.

In contrast to record project approvals in 2019, LNG developers have delayed signing off on new liquefaction capacity this year in light of the gas price collapse largely caused by the coronavirus pandemic. But the market had showed signs of weakness for some time. This is giving rise to concerns about a tight LNG market in the mid-2020s.