Shell criticizes Venture Global LNG over Calcasieu Pass commissioning delay

A senior Shell executive has criticized US-based Venture Global LNG over the delay to the formal start of commercial operations at the latter's Calcasieu Pass project, from which Shell has committed to take gas.

During a panel discussion Sept. 5 at the Gastech 2023 LNG conference in Singapore, Shell Energy Executive Vice President Steve Hill said that "the LNG business is underpinned by trust in long-term contracts," adding that "the long-term commitment that foundation buyers make, enable the regulatory certainty, the financing and the developments into new LNG projects."

Venture Global's first LNG project Calcasieu Pass remains in the longest-ever commissioning period for a US liquefaction facility, since exporting the first cargo from the Louisiana export terminal in March 2022, several months earlier than expected.

Operating on a pre-commercial basis may have enabled Venture Global to make billions of dollars selling commissioning cargoes over the past 18 months, but the move has also resulted in ongoing disputes with some of the foundation customers like Shell who made the Calcasieu Pass facility possible and wanted Venture Global to declare commercial service earlier.

"This is a wake-up call for the industry," Hill said, referring to Venture Global.

Venture Global LNG did not immediately respond to requests for comment about Shell's comments Sept. 5. Venture Global has previously said that it "remains in full compliance with all obligations under our long-term contracts, including timing."

Declaring Calcasieu Pass ready for commercial service earlier would have eased foundation customers' costs of satisfying their own consumption needs and allowed them to resell supplies to capture margins between what they would have been paying Venture Global and what they could have gotten on the spot market.

"It's simply not credible to operate for over a year, often above nameplate capacity, to sell 185 so-called commissioning cargoes for what's reported to be over $15 billion, and claim, firstly, that you're not in commercial operation and secondly that you can't supply any cargoes to those foundation buyers who you've previously publicly acknowledged enabled your project," Hill said.

Venture Global has loaded 202 LNG cargos from Calcasieu Pass as of Sept. 5, S&P Global Commodities at Sea data showed. Hill said that the previous six US LNG export projects to come online in the Lower 48 before Calcasieu Pass exported an average of less than ten commissioning cargoes before starting commercial service.

Commercial dispute

Along with Shell, Calcasieu Pass' foundation customers include Italy's Edison, Spain's Repsol, Portugal's Galp, BP and Poland's PGNiG.

Edison has confirmed starting arbitration proceedings against Venture Global in May at the London Court of International Arbitration over the extended commissioning. Edison has also been informed by Venture Global "that commercial operations at Calcasieu Pass will not start until late 2024," a spokesperson for the Italian energy company said in August, declining to comment further.

Repsol has also made its dissatisfaction about the wait for commercial operations to start at Calcasieu Pass known in filings in US regulatory proceedings seeking access to documents related to the export project that Venture Global has filed as privileged.

A Galp executive asked about the delayed start during a July 31 earnings call said "we are clearly very disappointed" and that it was "assessing all options to pursue the effectiveness of our contractual rights."

Shell in recent months has declined to comment "on the existence or status of any arbitration proceedings." But in July 27 comments to reporters, Shell CEO Wael Sawan said: "We have an existing agreement, a contractual obligation on both sides. Of course we expect both sides to honor that agreement and right now we don't see that happening and so we are taking the appropriate measures to be able to protect our rights."

The earliest commercial operation date for the long-term contracts underpinning Calcasieu Pass was in January of this year. From there, Venture Global had a 270-day window to achieve commercial operability and begin deliveries under the agreements, according to Moody's.

Hill added Sept. 5 that, if LNG contracts are seen as options for suppliers, then buyers won't sign up and the industry won't grow.

"The LNG industry depends upon honoring contracts and trust people will continue to honor contracts," Hill said.