Venture Global LNG may have reaped billions of dollars in profits from the longest ever commissioning of a US liquefaction facility, helping it boost its expansion efforts at a time when other developers have faced challenges securing financing amid inflation in construction costs.
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The boon has made Venture Global a darling among its peers while at the same time irking some of the foundation customers who made Calcasieu Pass possible and believe the margins the operator has earned at the Louisiana facility over the last 12 months should have been theirs. The operator had shipped 138 cargoes from Calcasieu Pass as of March 21, S&P Global Commodity Insights trade flow data showed. Revenue would have easily topped $10 billion based on average FOB cargo prices over the past year. Some market participants have estimated revenue for the privately held company of as much as $15 billion so far, with profits in the billions after netting out feedgas, pipeline transportation and lifting costs.
Recently, market participants have heard that Venture Global would start servicing long-term contracts for some foundation customers in July and others in the fourth quarter of this year. However, sources said, the operator will still have some capacity to be used for spot volumes heading into 2024, maintaining the enviable position the operator has carved out in a highly competitive commercial environment.
"This was one of projects that came just in time," an Atlantic LNG market source said. "Amazing timing. You couldn't dream it better. Every one of the customers would have been delighted to have it at that time."
Venture Global declined to comment.
With Calcasieu Pass, Venture Global charted a new path for developing a US LNG project by building the facility with modular trains that were constructed in Italy, shipped to the site of the facility, and installed, enabling the developer to reduce costs and start exporting cargoes in March 2022, about nine months to a year earlier than expected. The early start, just 2.5 years after commercially sanctioning the project versus the four to five years that other US terminals have taken to build, meant that the operator would have a much longer runway before contracts required it to begin commercial service.
When Northwest Europe delivered LNG prices rose to record highs last summer, to almost $75/MMBtu, Calcasieu Pass foundation customers began urging the operator to declare Calcasieu Pass ready for commercial service to allow their long-term contracts containing a fixed liquefaction fee to kick in. The long-term contracts carry some of the lowest fixed liquefaction fees among US exporters, with some agreements said to be below $2/MMBtu.
The move to commercial service earlier would have eased the cost of filling their own consumption needs and given customers including Shell, Britain's BP, Spain's Repsol and Poland's PGNiG the ability to resell some supplies to capture the wide spread between what they would have been paying Venture Global and what they could have fetched for those volumes on the spot market. Instead, the terminal has remained in commissioning status, with Venture Global able to capture those same margins. Even as prices have fallen sharply since last summer's highs, recently to a 21-month low for delivered LNG to Northwest Europe, Venture Global has still been able to profit meaningfully, in part because of the steep drop in US feedgas costs.
The extended wait for Venture Global to start commercial service at Calcasieu Pass has rankled counterparties in Europe, to the point that some are considering other options for future contracts, according to market sources. Venture Global has not started commercial service on any of the liquefaction trains at Calcasieu Pass since US regulators in May 2022 gave the developer permission to enter the first four liquefaction train blocks into commercial service, according to market sources. Calcasieu Pass began production in January 2022.
Even with the dismay among some counterparties, Venture Global has been able to continue its commercial success in recent months, primarily among Asian customers.
"It clearly didn't scare people enough," a second Atlantic LNG market source said.
Venture Global has said it plans to follow a similar development playbook with its Plaquemines LNG terminal -- also in Louisiana -- having announced an FID March 13 on the second phase of the 20 million mt/year project.
"The favorable coincidence of Calcasieu Pass LNG's initial startup in early 2022 with the global LNG demand rebound has given Venture Global significant momentum across all its projects," said Anusha de Silva, an associate director for global LNG at S&P Global Commodity Insights.
Venture Global has been one of the major beneficiaries of a wave of commercial activity over the past year as supply concerns mounted following Russia's invasion of Ukraine in February 2022. The company commercially sanctioned the second phase of Plaquemines LNG, backed by customers including ExxonMobil, Chevron, Germany's EnBW, New Fortress Energy, Malaysia's Petronas, China Gas and Excelerate Energy.
Calcasieu Pass was expected to achieve a commercial operation date in the second half of 2023, according to Moody's Investors Service, which cited "significant remaining work related to commissioning, carryover completions, rectification work, warranty work and reliability testing" continued at the facility, where all 18 trains were substantially complete and producing LNG.
The earliest commercial operation date for the long-term contracts underpinning the terminal was in January of this year. From there, Venture Global had a 270-day window to achieve commercial operability and begin deliveries under the agreements, according to Moody's. Once Venture Global does begin commercial service, the developer's project authorization from the US Federal Energy Regulatory Commission will require the developer to notify the agency within 30 days. A FERC spokesperson confirmed that the developer had yet to do so.
The extended commissioning period of Calcasieu Pass could have maximized returns for Venture Global's investors and put the developer in a stronger position from a balance sheet perspective to pursue its expansion plans, but what mattered most for the global gas market was volumes from Calcasieu Pass becoming available when they did, according to Ira Joseph, global fellow at Columbia University's Center on Global Energy Policy.
"From a commercial perspective that's the important thing -- who is getting paid what is an issue between them and the buyers," Joseph said in an interview. "The volume was on the market before it was supposed to be, and given what happened with the loss of Russian volumes, I'm sure that was very helpful in terms of filling European storage last summer."