U.S. liquefied natural gas (LNG) company Venture Global LNG sold over 200 LNG cargoes worth about $18.2 billion since its first export plant started operations in March 2022, according to vessel data and Reuters gas price calculations.
Those shipments have become a flashpoint for gas buyers and marketers who insist they should have received some of the supplies under long-term contracts for Venture Global's Calcasieu Pass export plant in Louisiana. There have been at least three contract arbitration cases brought this year.
WHY DOES IT MATTER?
The dispute has put a spotlight on what constitutes a proper commissioning period. Shell (SHEL.L), BP (BP.L), Edison (EDNn.MI) and Repsol (REP.MC) claim to have been unfairly deprived of cargoes sold to others.
Venture Global maintains equipment failures tied to onsite power generation have made its roughly 11 cargoes per month "pre-commission cargoes," not bound by those contracts.
In an April filing with the U.S. Federal Energy Regulatory Commission (FERC), Venture Global said it expects commercial operations to begin in the first quarter of 2024. The company has not said if that remains its planned start date.
The issue of when a plant is officially commissioned has led other LNG developers to specify their commissioning periods. New plants typically set a two- to three-month period in which "pre-commercial" cargoes could be sold.
WHERE HAVE ALL THE CARGOES GONE?
Since it started exports in March 2022, Venture Global has sold roughly 200 cargoes worth about $18.2 billion through the end of August 2023, according to Reuters calculations of natural gas price data from financial firm LSEG.
About two-thirds of those cargoes, or around 130, were sold for around $13.6 billion in Europe. Another 30 or so were sold in Asia and the remaining roughly 40 went to Central and South America and the Caribbean.
WHAT WERE GAS PRICES WHEN THOSE CARGOES WERE SOLD?
Gas futures at the Dutch Title Transfer Facility (TTF) , the European benchmark, climbed as high as $91 per million British thermal units (mmBtu) in August 2022 as Europe sought to replace Russian gas after Moscow's invasion of Ukraine.
Venture Global sold over 100 cargoes in 2022, according to U.S. energy and LSEG vessel tracking data, with about 70% of the LNG going to Europe where prices were higher than in Asia. The remaining cargoes were roughly evenly split between Asia and Latin America.
Gas futures from March-December 2022 averaged $43 per mmBtu at the TTF hub in Europe and $35 at the Japan Korea Marker (JKM) benchmark in Asia, LSEG data showed.
Venture Global also sold about 100 cargoes from January-August 2023. About 60% of those cargoes went to Europe during the first eight months of this year. Latin America received about 25% of the cargoes and Asia about 15%.
Gas prices from January-August 2023 averaged $13 per mmBtu at TTF in Europe and $14 at JKM in Asia, LSEG data showed.
The cargo worth the most based on benchmark gas prices was to Croatia in August 2022 valued at around $266 million. That, however, may not be what Venture Global received for the cargo since the company has not disclosed how much it received for its LNG.
WHICH COMPANIES HAVE BEEN HIT?
In 2016, Shell agreed to purchase 1 million metric tons per annum (MTPA) of LNG over a 20-year period from Calcasieu Pass. BP inked an agreement in 2018 for 2 MTPA of LNG over 20-years.
Under both agreements, supply was to start from the commercial operations date.
Initial customers for new projects typically receive favorable gas-processing fees, which at the time Shell and BP signed were about $2 per mmBtu, according to analysts. Industry fees since have since climbed to around $2.75.
Shell and BP could receive about 30 cargoes each year, according to analysts estimates.
"It is unlikely that the offtakers would have been able to hit their plateau contract quantity in the first year," said Kaushal Ramesh, Rystad Energy's vice president for LNG research.
But assuming they had gotten half the plateau quantity, it would have amounted to 15 cargoes each, Ramesh said.
In July, Italy's Edison (EDNn.MI), which signed a 20-year agreement for 1 MTPA of LNG in 2017, blamed a 7% first-half decline in profit on the lack of LNG deliveries from the U.S. producer.
