W|EPC: Sempra’s Costa Azul – Is ECA Different? A Deep Dive Into SRE’s Mighty Mouse

Sempra LNG’s Costa Azul – Analysis & Risks As Larger Projects Falter

• Overview                                                                            Pages 1-3
• ECA Phase 1 & 2 Structures                                            Pages 3-4
• Supply Dynamics & Feedstock Analysis                       Pages 6-7
• Sempra LNG Commercial Arrangements                    Pages 8-9
• EPC Analysis
  • Project History & Dynamics                                    Pages 9-10
  • TechnipFMC – Historical Execution Details         Pages 10-12
  • Site Issues With Modularization                            Pages 12-13
  • Independent Site & Schedule Analysis                Pages 13-17
  • Project Cost Analysis & Major Risks                      Pages 18-26
• Shipping, Midstream                                                        Pages 27-28
• Management Questions                                                  Pages 29-30
• Conclusions                                                                        Pages 30-31

Mighty Mouse? Sempra’s (SRE) Costa Azul LNG (ECA, 2.4mtpa Phase-1) might be the only North American LNG project with a realistic chance at FID in 2020. As we saw last cycle, being small (and cheap) can be an advantage in difficult markets. As we note below, we’ve included our key takeaways around 1) Project viability in the current environment, 2) Site & Permitting Issues, 3) our independent project timeline & cost estimates, and 4) our Independent assessment of ECA’s project economics. 

Background: Energía Costa Azul (ECA) is a 1 BCF/d LNG import terminal located north of Ensenada, Baja California, Mexico, ~31 miles south of the U.S./Mexican border (San Diego-Tijuana). It’s owned by Infrastructura Energetic Nova (IEnova), one of the largest natural gas infrastructure developers in Mexico, and is listed on the Mexican Stock Exchange (BMV: IENOVA). Sempra Energy owns 66.43% of IEnova.
Existing Infrastructure: The current ECA import terminal (Figure 1) includes the following infrastructure: (1) a marine berth and breakwater; (2) two 160,000 m3 LNG tanks; and (3) LNG vaporizers, nitrogen injection systems, and pipeline interconnections. Similar to some existing U.S. exporters and brownfield projects, ECA will be turning their facilities around to export LNG.

Permitting: ECA has received most of the major Mexico and U.S. permits needed to begin construction, but still lacks a key Mexican land-use permit. ECA LNG is not subject to FERC review under the National Gas Act (NGA) or National Environmental Policy Agency (NEPA). However, ECA is subject to various Mexican state and federal regulatory agencies, such as the Secretaris de Medio Ambiente y Recursos Naturales/ Ministry of Environmental and Natural Resources (SEMARNAT) and the Agencia Nacional de Seguridad Industrial y de Proteccion al Medio Ambiente del Sector Hidrocarburos/ National Agency for Industrial Security and Environmental Protection for the Hydrocarbon Industry (ASEA), as well as the U.S. Department of Energy (DOE).…continued
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