Sempra Infrastructure says Costa Azul LNG project delayed by labor problems
HOUSTON, Aug 6 (Reuters) - Sempra Infrastructure's Energia Costa Azul LNG export project in Mexico has been further delayed by labor and productivity challenges that will boost the project's cost, the company said on Tuesday.
Sempra Infrastructure, a unit of utility giant Sempra, has been building the first phase, a 3.5 million-metric-ton per annum (MTPA) liquefied natural gas train for the LNG export project in Mexico. The facility will give the company direct access from Mexico's Pacific coast to feed LNG markets in Asia.
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"We are actively engaged with our contractor to advance the project, and we'll see increased features for the projects in the form of additional carrying costs," Sempra Chief Financial Officer Karen Sedgwick said on an earnings call.
She did not give a new cost estimate. In 2020 the company said it planned to spend about $2 billion for the first phase.
Sedgwick said the higher construction costs are unlikely to hurt the project's economics because there will be lower estimated commissioning rent based on forward price curves.
"Despite the delay (and the) potential changes in capital, we still expect to maintain strong integrated financial returns with our original forecast at the time that we took FID (the final investment decision) in 2020," Sedgwick said on the earnings call.
She cited factors including optimization opportunities, stronger LNG demand over the long term and inflation protection within the sales and purchase agreement.
The First LNG from the export project is set for 2025, with contracted customers receiving supplies in spring 2026, Sempra said in its second-quarter earnings report.
Of the 3.5 MTPA in phase 1 of the project, 2.4 MTPA of that capacity has been contracted to France's TotalEnergies and Japanese trading house Mitsui & Co, according to the company's website.
Sempra also said it hoped to create efficiencies by moving seamlessly between the two phases of its Port Arthur, Texas, LNG projects by using the same contractor, Bechtel.
"We're excited as the project moves forward while targeting cost to construction efficiencies by having them roll uninterrupted from phase one to phase 2," said Justin Bird, Sempra's executive vice president.
U.S. LNG projects have recently faced cost escalation due to shortages of skilled labor.
Phase 2 would add an additional 13 MTPA to phase 1's 13 MTPA currently under construction. Phase 1 is expected to cost $13 billion. Sempra recently signed a fixed-priced contract with Bechtel for an undisclosed sum to construct phase 2.
(Reporting by Curtis Williams in Houston; Editing by Franklin Paul, Jonathan Oatis, David Gregorio and Leslie Adler)