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Power City | Sempra Infrastructure, ConocoPhillips new agreement to develop Port Arthur LNG will create job opportunities

ConocoPhillips has agreed to have a 30% stake in PALNG, which will help pay for infrastructure improvements and eventually, increase production.

PORT ARTHUR, Texas — Sempra announced Thursday that its subsidiary, Sempra Infrastructure, and ConocoPhillips have entered into a new agreement to develop the Port Arthur LNG (PALNG) project, which will pave the way for new job opportunities in Southeast Texas. 

Thursday's agreement creates the framework to build the PALNG along Highway 87, between Port Arthur and Sabine Pass.

Because of this new partnership, Port Arthur will become a key player in the liquified natural gas industry, which is a hot commodity right now due to U.S. exports being shipped on tankers to Europe. 

ConocoPhillips has agreed to have a 30% stake in PALNG, which will help pay for infrastructure improvements and eventually, increase production.

Sempra executives hope this 20-year partnership will give the world's energy supply a much needed boost. 

Sempra Infrastructure President Dan Brouillette says the Port Arthur facility was hand-picked for this investment, due to the community and strong labor force. 

"It's one of the best in the country, so it's a very good place to do business. Texas is a great place to do business, so that's very, very interactive for us. The second part is it's proximity for the Gulf of Mexico," Brouillette said.

Brouillete couldn't provide 12News an exact timeline for construction, since more agreements needs to be finalized, but under the deal, ConocoPhillips would supply some of the natural gas that would be liquified in Port Arthur.

From a Sempra Infrastructure news release: 

Sempra (NYSE: SRE) (BMV: SRE) today announced that its subsidiary, Sempra Infrastructure, and ConocoPhillips (NYSE: COP) have entered into a heads of agreement (HOA) to develop Sempra Infrastructure’s Port Arthur LNG project and jointly participate in other related energy infrastructure in Southeast Texas and the Pacific Coast of Mexico.

“At Sempra, we believe bold new partnerships will be central to solving the world’s energy security and decarbonization challenges,” said Jeffrey W. Martin, chairman and chief executive officer of Sempra. “That is why we are excited to announce this proposed partnership with ConocoPhillips, a leading global energy producer that also shares our vision of responsibly developing and delivering cleaner energy resources.”

“The decision to enter into this agreement with Sempra provides us with a ground-floor opportunity to participate in premier LNG developments, reinforcing our commitment to helping solve the world’s energy supply needs as we transition to a lower carbon future,” said Ryan Lance, chairman and chief executive officer of ConocoPhillips. “Sempra brings a long history of successful LNG project development, and we look forward to working together to provide reliable LNG to support the energy transition and strengthen U.S. and global energy security.”

Today’s announcement marks an important milestone with the substantial completion of the marketing phase of Phase 1 of the Port Arthur LNG project. The referenced HOA anticipates the negotiation of a definitive agreement for a 20-year liquefied natural gas (LNG) tolling arrangement for 5 million tons per annum (Mtpa) at Phase 1 of the Port Arthur LNG project under development in Jefferson County, Texas. The HOA also contemplates a 30% equity investment in Phase 1 of Port Arthur LNG by ConocoPhillips and the potential for ConocoPhillips to supply additional natural gas to the proposed facility, including responsibly sourced natural gas, for the project’s other LNG sales.

In addition to the provisions related to Phase 1 of the project, ConocoPhillips would have the option to acquire certain LNG offtake and equity ownership from future developments of the Port Arthur LNG site, which may include additional LNG trains as well as low-carbon hydrogen infrastructure. Sempra Infrastructure would also have the opportunity to participate in carbon capture and sequestration projects developed by ConocoPhillips in Texas or Louisiana in connection with the Port Arthur LNG project.

Phase 1 of the Port Arthur LNG project is permitted. The project is expected to include two natural gas liquefaction trains and LNG storage tanks, as well as associated facilities capable of producing, under optimal conditions, up to approximately 13.5 Mtpa of LNG. Sempra Infrastructure and Bechtel are working on updating the terms of the project’s fixed-price engineering, procurement and construction contract that was previously announced in 2020. A similarly sized Phase 2 project is also under active marketing and development.

Additionally, the HOA provides for collaboration between the two companies for LNG offtake, natural gas supply and equity investment for Phase 2 of the ECA LNG export development project in Baja California, Mexico, including up to one-third of the exported LNG volumes.

The ECA LNG Phase 2 liquefaction export project is in early-stage development by Sempra Infrastructure. ECA LNG Phase 1 is currently under construction with first production of LNG by the 3.25-Mtpa facility expected by the end of 2024.

The referenced HOA is a preliminary, non-binding arrangement, and the development of Sempra Infrastructure’s LNG projects remains subject to a number of risks and uncertainties, including reaching definitive agreements, securing all necessary permits, signing engineering and construction contracts, obtaining financing and incentives and reaching a final investment decision for each project.

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