Venture Global defends extended Calcasieu Pass commissioning as dispute with customers escalates

Venture Global pushed back against criticism from some foundation customers of Calcasieu Pass in the escalating dispute over the operator's wait to declare the LNG export facility ready for commercial service, saying its long-term contracts showed it had always planned to begin shipments "far in advance" of completing the terminal.

The comments from the US exporter followed reports that Italian offtaker Edison had started arbitration proceedings against Venture Global over the extended commissioning process and as the exporter's back-and-forth with another offtaker, Spain's Repsol, continued in a US regulatory proceeding.

Calcasieu Pass remains in the longest-ever commissioning period for a US liquefaction facility, since exporting the first cargo from the facility in March 2022, several months earlier than expected. Operating on a pre-commercial basis may have enabled Venture Global to make billions of dollars over the past year, having loaded some 173 cargoes at Calcasieu Pass as of June 12. The process, however, has also drawn objections from some customers who wanted the operator to start servicing long-term contracts sooner.

"We have always planned to incrementally start up the facility and produce LNG for export during construction and commissioning, far in advance of even mechanical completion of the entire facility," Venture Global spokesperson Shaylyn Hynes said in a June 12 statement responding to questions about reports of Edison starting arbitration proceedings at the London Court of International Arbitration in May. "Our customers have been aware of this approach from the beginning and our long-term contracts reflect this."

The statement from Venture Global, which declined to comment on any arbitration claims, did not refer to Edison by name. Edison officials did not respond to requests for comment June 12 about the arbitration proceedings, which was first reported June 7 by the Italian news outlet Il Sole 24 Ore Radiocor, citing Edison.

Venture Global has attributed the prolonged commissioning to the novel midscale, modular design of Calcasieu Pass and ongoing "reliability challenges" affecting the nameplate 10 million mt/year export facility. It also told customers in late March that commercial operations at the terminal would be delayed because of time needed to complete repairs at a power generating unit at the facility.

"Venture Global remains in full compliance with all obligations under our long-term contracts, including timing," Hynes said. "Notwithstanding that fact, some parties have unfortunately resorted to making false claims and accusations through what appears to be a coordinated public relations campaign in an attempt to damage Venture Global's reputation and gain commercial leverage."

FERC proceeding

Separately, Venture Global also objected June 12 to an effort by Repsol to convince the US Federal Energy Regulatory Commission to reconsider its denial of a request by the Spanish energy company to intervene in a proceeding for Calcasieu Pass. The "critical right" that Repsol said it would be afforded is access to reports related to the export project that Venture Global has filed as privileged at FERC, allowing the Spanish energy company to assess "Venture Global's claims that the project has not completed commissioning and reached commercial operation."

Repsol filed a similar intervention request in April at the US Department of Energy, which oversees the exports of US LNG. In its May response at the DOE, Venture Global described Repsol as an "impatient" customer.

"The unprecedented circumstance of an LNG project conducting itself as commercially operational by exporting numerous cargoes over the course of a year, but not declaring commercial operation is plainly cause for concern, particularly for a long-term customer like Repsol," Repsol said in its rehearing request at FERC, filed June 2.

In its June 12 reply, Venture Global said Repsol's request amounted to a "misuse and abuse" of FERC procedures.

"The real reason for Repsol seeking access to confidential and proprietary information that Calcasieu Pass has filed with the commission is, at a minimum, for commercial advantage, separate and apart from its newfound interest in participating in this Commission proceeding," Venture Global said in the filing. "At its worst, the rehearing request is a transparent attempt to exert extra-contractual commercial pressure on Calcasieu Pass by making unsubstantiated claims in a high visibility, publicly filed document."

Foundation customers

The start of exports at Calcasieu Pass came just 2.5 years after Venture Global commercially sanctioned the project, compared with four years or longer that it has taken other US LNG terminals that have been built.

But starting commercial operations at Calcasieu Pass sooner would have eased the cost of satisfying long-term offtakers' consumption needs and allowed them to capture margins between what they would have been paying Venture Global and what they could have gotten on the spot market.

Edison and Repsol each have a 20-year contract to buy 1 million mt/year of LNG from Calcasieu Pass, in 2017 and in 2018, respectively. Other foundational customers include Shell, Britain's BP, and Poland's PGNiG.

"We have always been and will continue to be open and transparent with our customers and all regulatory bodies, including with respect to the timing for completion and declaration of commercial operations for the facility," Hynes said.