Sempra (SRE) Adds a 20-Year LNG Agreement. How Much Commercial Risk Does it Remove?

On September 14, Sempra's subsidiary entered into a 20-year contract with Petrobras to purchase approximately 0.8 million tonnes of liquefied natural gas (LNG) annually. The supply will originate from the subsidiary's Port Arthur LNG Phase 2 in Texas, a project still under construction with trains 3 and 4 scheduled for commercial operation in 2030 and 2031, respectively.

This agreement enhances Sempra's visibility into future sales and introduces a new South American LNG customer for the subsidiary, broadening its geographic buyer base. For Sempra, the key benefit is securing a long-term buyer for a portion of the contracted capacity, potentially reducing the need to find buyers as production ramps up.

The annual commitment represents around 6.2% of the Phase 2's planned 13-million-tonne annual capacity. However, the success of this agreement hinges on the project's construction, commissioning, and the LNG's ability to generate sufficient margin to cover the significant capital investment, which is estimated at $12 billion for construction plus $2 billion for shared facilities.

Investors should note that while the agreement reduces commercial risk for Sempra, it does not guarantee profitability, as operational performance and contract terms remain uncertain.