VG begins contracted LNG deliveries at Calcasieu Pass

US LNG exporter Venture Global began deliveries of long-term contractual cargoes at its 12.4mn t/yr Calcasieu Pass terminal in Louisiana today after the facility started commercial operations, more than three years after producing its first LNG.

"We are excited to reach this milestone and are grateful for our regulators and supply chain partners who have worked with our team to reach commercial operations as efficiently and safely as possible," said Venture Global chief executive Mike Sabel.

But the long-delayed and highly contested start comes amid ongoing arbitration proceedings against Venture Global, which some customers including Shell, BP, Italian utility Edison and Spanish company Repsol argue was unjustified in deferring the contracted supplies (see offtakers table). The LNG exporter originally sought to begin commercial operations in 2022 but cited impacts from Covid-19, two hurricanes and "major unforeseen manufacturing issues" related to one of the plant's heat recovery steam generators, equipment that helps power the facility.

Because several of the plant's facilities, including the power island, were not officially placed in service with federal authorization, Venture Global maintained that the plant was not commercially operating — despite producing 444 cargoes totaling 28.2mn t of LNG (about 1.28 trillion cubic feet of natural gas) since its first in March 2022, according to Vortexa data.

The start-up Tuesday comes on the final day before Venture Global could have lost control of the project. The company said in a December filing with the US Securities and Exchange Commission (SEC) that the agreement under which it had financed debt requires commercial operations to be completed by 1 June 2025. Should commercial operations have not begun 45 days prior to this date — which is Tuesday — then the agreement defaults, allowing "certain investors" to exercise control over the project.

Before Tuesday, the company instead sold cargoes on the spot market for prices much higher than the terms of its offtake agreements.

Calcasieu Pass produced its first LNG in January 2022 and exported its first cargo on 1 March 2022 — less than a week after Russia, then a key supplier of gas to Europe, invaded Ukraine. The facility produced its first LNG just 29 months after reaching a final investment decision (FID) on the project, compared with the industry average of four to five years.

The timing of the project's start dovetailed with the war-driven volatility in the European gas market, helping Venture Global realize much larger profits than it would have under contracted volumes. The firm's liquefaction fees in 2023 and 2024 averaged $12.23/mn Btu and $7.28/mn Btu, respectively, compared with the average $1.97/mn Btu in its long-term deals, according to a company presentation in March.

The lengthy commissioning process generated $19.6bn in revenue by the end of September 2024, Venture Global said in the December SEC filing. Shell estimated that Venture Global sold cargoes in 2023 at an average of $48.8mn per shipment, "raking in billions of dollars while shirking its contractual obligations", according to a filing with US energy regulator FERC in March 2024.

Venture Global said in March that the customer arbitration cases are not likely to be resolved until after 2025.

LNG facilities usually produce commissioning cargoes for a few months before beginning long-term contracts. But Venture Global has said its unique plant design, which uses a higher number of smaller, modular liquefaction trains compared with traditional trains, requires a longer start-up process. Calcasieu Pass LNG consists of 18 trains paired in nine blocks, and a similarly long commissioning period is expected at the first two phases of Venture Global's 27.2mn t/yr Plaquemines facility consisting of 36 trains.

The company also has plans for an 18.1mn t/yr expansion at Plaquemines. An FID is expected in mid-2027, with first LNG production 18-24 months later.

Venture Global estimated that its third LNG facility, the 28mn t/yr CP2 facility adjacent to Calcasieu Pass, could export up to 550 commissioning cargoes. The company expects to make an investment decision on the first phase of CP2 this year.

By Tray Swanson