Shell says Venture Global ‘wrongfully earned’ $3.5 bil from Calcasieu Pass LNG commissioning delay

Shell is arguing US LNG exporter Venture Global “wrongfully earned” an estimated $3.5 billion by selling cargoes from its Calcasieu Pass terminal on the spot market instead of providing European customers their contracted volumes as prices of the fuel surged following the loss of Russian pipeline gas.

The energy giant based its claim on a study it commissioned from economic consulting firm Compass Lexecon. The accusations marked the latest volley in a long-running dispute over the operator’s failure to provide foundational customers of the project with contracted volumes, despite exporting LNG from the facility for more than two years.

Shell and other long-term customers have accused Venture Global of holding back on servicing contracts carrying some of the lowest fixed fees among US projects so it could instead sell cargoes for higher prices on the spot market, benefitting from the surge in European gas prices after Russia’s invasion of Ukraine. Calcasieu Pass, which has a nameplate capacity of 10 million metric tons per year, has loaded more than 360 cargoes since the first export from the facility in March 2022, S&P Global Commodity Insights data showed Sept. 5.

Shell said it commissioned the study “to assess how much more revenue Venture Global wrongfully earned by denying certain European customers their contracted cargoes and selling those LNG cargoes on the spot market instead.”

In additional to Shell, foundational customers of Calcasieu Pass include BP, Spain’s Repsol, Italy’s Edison, Portugal’s Galp, Poland’s PKN Orlen. Shell and others are in arbitration against the US exporter.

A briefing note related to the study also seen by Commodity Insights said one long-term buyer “had extraordinary difficulties” because of Venture Global, having to source LNG from at least five competing US facilities to make up for 1.5 MMt/year that it was not supplied by Venture Global. The document did not name the customer, but the volumes matched the contracted position of PKN Orlen.

PKN Orlen declined to comment on the report.

The Financial Times first reported on the study and the briefing note it said was prepared as part of the arbitration proceedings. Compass Lexecon has worked on Shell’s behalf in past litigation.

Venture Global dismissed the report from Compass Lexecon as “paid propaganda.”

“To be clear, Venture Global is honoring its contractual obligations to its long-term customers in strict conformity with its long-term contracts,” Venture Global said in a statement. “Due to our ability to produce first LNG during construction we have been uniquely positioned to bring more incremental molecules into the market which lowers prices, not raises them.”

Compass Lexecon's report looked at a 908-day period from October 2022, when Calcasieu Pass operations reached full capacity, through May 2024 in estimating the $3.5 billion in extra revenue earned by selling more than 330 cargoes on the spot market instead of at contracted prices. If Venture Global continues to sell at projected spot prices through June 2025, that could reach about $4.66 billion, the consultant said.

Venture Global has said it expects to begin full operations in late 2024, having attributed the prolonged commissioning to the novel design of Calcasieu Pass and problems with power generation facilities at the plant. Edison said in a recent filing with US energy regulators that the issue is being litigated in six arbitrations between Venture Global and the foundational customers.

Beyond Calcasieu Pass, Venture Global is nearing the startup of its second terminal, the nameplate 20 MMt/year Plaquemines facility, and it also developing another nameplate 20 MMt/year facility, CP2, which has yet to reach a final investment decision. Both projects are in Louisiana.

A Shell spokesperson said the consultant’s report “deepens our understanding of the magnitude of VG’s extraordinary behavior” and could be useful for policymakers and regulators “as they consider what to do about it.”

“The company has taken advantage of its European customers after the Russian invasion, and its misconduct harms the trust and reliability of the entire US export market,” Shell said. “Venture Global likes to portray that it is generously supplying LNG to European citizens most impacted by Russia’s invasion of Ukraine. What they’ve failed to disclose is how they’ve banked billions in additional profits on the backs of those customers -- all while denying foundational buyers the cargoes they were contractually promised.”