Sempra revisits choice of Bechtel on Cameron LNG expansion to cut costs, sources say
HOUSTON, May 13 (Reuters) - Sempra LNG is revisiting its selection of Bechtel to build its Cameron LNG expansion project in Louisiana due to rising construction costs, two people familiar with the matter told Reuters.
The Sempra-Bechtel pricing dispute reflects a broader hike in construction and labor costs that are affecting several U.S. liquefied natural gas (LNG) export projects under development and threaten to further delay others.
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Sempra "has gone back out for an EPC (engineering procurement and construction) contractor for its expansion project," one of the people familiar with the matter said.
"High demand for skilled labor for plant construction is causing costs to rise and making some projects too expensive to build," the person added.
Sempra LNG operates Cameron, the third largest U.S. LNG export plant, and is constructing facilities in Mexico and Texas in addition to pursuing the expansion of the Louisiana plant.
Cameron LNG Phase 2, a venture between affiliates of Sempra LNG, TotalEnergies, Mitsui, and Japan LNG Investment LLC, aims to expand the capacity of the three trains at its 12 million metric tons per annum (MTPA) facility and add a fourth.
Sempra LNG CEO Justin Bird had told Wall Street analysts in March that it was "working with Bechtel on value engineering. And at this stage, we feel it's best to continue those efforts while evaluating other potential EPC contractors."
McDermott International Inc built the first phase of the Cameron plant, Sempra's first LNG facility, and Bechtel is building the company's newest project, the Port Arthur LNG plant in Texas.
This month, however, Bird did not mention Bechtel in remarks on the Cameron expansion, saying only it was working with unnamed partners to "optimize cost through value engineering."
Sempra declined to comment on the status of its Cameron LNG construction contract.
Paul Marsden, the president of Bechtel Energy, also declined to comment on its status.
“There’s no doubt that the whole industry is feeling inflationary pressures. We need to actively forecast and manage labor availability and supply chain like never before," he told Reuters via email.
Last week, the Golden Pass LNG joint venture in Louisiana acknowledged a dispute with one of its builders. It has delayed the project startup into 2025.
Sempra last year said it hoped to give the Cameron expansion project a financial greenlight in 2024. It subsequently pushed back the decision until the first half of 2025.
(Reporting by Curtis Williams in HoustonEditing by Marguerita Choy)