Start of commercial operations at Calcasieu Pass delayed, Venture Global LNG tells US regulator

US-based Venture Global LNG told regulators it has notified its long-term customers that commercial operations at the Calcasieu Pass terminal will be delayed due to the time needed to finish repairs at a power generation unit at the facility, according to a letter dated March 28 seen by S&P Global Commodity Insights.

"As GE conducts the necessary repairs, we will continue to safely commission the facility and, subject to these activities, continue to produce commissioning cargoes of LNG for export," the letter addessed to the US Federal Energy Regulatory Commission or FERC said.

Meanwhile, Venture Global LNG has issued force majeure to some of its spot and long-term customers saying its commercial operations date or COD will be delayed "because it continues to face periodic reliability challenges," according to one of at least four traders with knowledge of the matter who spoke to S&P Global.

Venture Global LNG's Calcasieu Pass began production in January 2022 after accelerating construction work and finishing its LNG production trains ahead of schedule. While it exported its commissioning cargoes at high prices following the Russia-Ukraine war, it has not declared the start of commercial operations for its customers with long-term offtake agreements.

These foundation customers with long-term agreements are likely to be the main ones impacted by the force majeure because it delays the COD date, several traders said. One Chinese offtaker said the short-term impact on supply is limited as Calcasieu Pass still has until the fourth quarter of 2023 to fulfill term volumes for customers.

Venture Global LNG did not immediately respond to queries sent out of office hours.

Letter to regulator

In its letter to FERC, Venture Global said over the past year it has exported 128 cargoes from Calcasieu Pass that were delivered to 24 countries, and around 75% of these cargoes landed in Europe.

It said Calcasieu Pass's commissioning process has been different from other US LNG export projects due to its modular, midscale design and on-site power generation, among other reasons. It "requires substantial testing and a phased commissioning process before it can be expected to be fully operational and confirmed to be prepared to reliably meet its long-term contractual obligations," Venture Global said in the letter.

Venture Global LNG said daily corrective, testing and rectification work was ongoing at Calcasieu Pass and while it is able to produce LNG, "it remains in the commissioning phase because it continues to face periodic reliability challenges impacting the facility."

The facility recently experienced leaks in five horizontal heat recovery steam generator units that facilitate combined-cycle power generation by converting waste heat in the power island to steam, it said, adding that it tried to repair the leaks through welding while the supplier, General Electric or GE was asked to investigate the cause of the leaks. This follows an earlier incident at the power island last fall, it said.

"Although these circumstances do not raise any safety concerns, the units will require extensive repairs and replacements before the power island can function reliably and as designed," the latter said.

"We will continue to provide updates through additional communications to ensure the most accurate information regarding the timing for completion and declaration of commercial operations for the facility is shared with our customers and regulators," Venture Global added.