Fierce disputes with its foundational LNG buyers and shifting attitude of potential buyers in a bid to curb their exposure to gas hub pricing have undermined Venture Global marketing efforts.
Fierce disputes with its foundational LNG buyers and shifting attitude of potential buyers in a bid to curb their exposure to gas hub pricing have undermined Venture Global's marketing efforts.
The US LNG producer is in deep disputes with its Calcasieu Pass LNG project’s main off-takers since earlier this year. Both sides have recently sent claim and counter-claim letters to the US-EU Task Force over Venture Global’s “deliberately” delaying commercial operations date (COD) of the project which "detrimental consequences" for energy security in Europe at a “critical time”.
However,
Mostafa Sharif, Gas Market Senior Advisor, has said that sending argument letters to the EU-US Task Force by LNG buyers [Shell, BP,…] was not practically effective as “in fact a commercial issue (reneging) has been referred to a politically-oriented” body. “However this practice has serious consequences for Venture Global and damaged its reputation in the market.”
EU-US Task Force primarily aimed to reduce the EU's reliance on Russian energy and diversifying its natural gas supplies in alignment with the climate objectives, and reducing EU countries’ overall demand for natural gas, among other measures.
“If it is proven that Venture Global had entered into sales contracts with the prior intention of not delivering the committed LNG cargoes, the buyers can eventually pursue their cases in the US criminal courts as from a legal point of view this practice may be an example of fraud,” Sharif has reminded.
Venture Global LNG has rejected the buyers’ claims saying its plant is not fully operational due to faulty power equipment that is being repaired as it is entitled to sell "commissioning" cargoes for its own accounts under the contracts.
It had earlier notified its Calcasieu Pass project’s contractual off-takers that the COD of the project has been postponed again, this time to the end of 2024.
The 11.25 MMT/Y Calcasieu Pass exported its first LNG cargo to France in March 2022 and remains in the commissioning mode so far as Venture Global has been selling all cargoes in the spot markets.
Global LNG Info Analytics estimates that the US operator has already exported at least 200 spot cargoes from the project and earned about $18.3 billion. Most of the cargoes exported to the European market.
Some market sources suggest that Venture Global is improving its first project’s poor economy by postponements of the COD and selling the cargoes in the spot markets at higher prices.
Just before sanctioning of the Calcasieu Pass in August 2019, Global LNG Info Analytics had assessed that the project’s IRR would be between -1.5% up to 5.5%, depends on the proceed costs. “The company has offered aggressive pricing formulas in its LNG sale deals (reportedly less than US$2/MMBTU) and as the project’s EPC contract was a turnkey contract, it has to bear most of the project’s cost escalations risk.”
LNG off-takers of the Calcasieu Pass are Shell, Repsol, Edison, Galp, BP, Sinopec (Unipec), and PGNiG.
Venture Global has to market a huge volume of uncommitted LNG to be produced by its under-development export projects while it anticipates to increase its LNG production to 70 MMT/Y by the end of this decade.
However, since 6-month ago when the company signed its latest LNG sales deal with German former Gazprom subsidiary SEFE, it has not yet announced any new sales agreement.
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