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Venture Global makes final decision on Calcasieu Pass LNG terminal

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Venture Global makes final decision on Calcasieu Pass LNG terminal

Venture Global LNG announced it had made a formal final investment decision to build its Calcasieu Pass LNG export project in Louisiana.

The decision was expected after the privately held company announced in July that it secured financing commitments nearly doubling the $5.8 billion needed to cover the development of the export terminal and the associated TransCameron pipeline. Venture Global announced the final investment decision in an update to an Aug. 19 news release that said the company closed the project financing.

But the commercial sanctioning of a new greenfield LNG terminal on the U.S. Gulf Coast nonetheless represented a significant development for the burgeoning U.S. LNG industry.

"Venture Global is taking some different kinds of risks from companies and projects that have come before them, but being able to successfully reach [a final investment decision] illustrates that those risks are manageable and that the project finance community can get comfortable with the kinds of risks that Venture Global is taking," said Katie Bays, an energy analyst and co-founder of research and consulting firm Sandhill Strategy.

Venture Global had sought to stand out in a competitive field of U.S. LNG export developers by offering a low-cost model. It said it could build Calcasieu Pass with midscale modular liquefaction trains at about half the cost of similar-sized plants. The Calcasieu Pass facility in Cameron Parish, La., would be capable of producing 10 million tonnes per annum of LNG.

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"Our goal has always been to lower the cost of electricity by delivering clean, low-cost LNG to the world," Venture Global's co-CEOs Mike Sabel and Bob Pender said in the Aug. 19 statement. "The closing of our financing is the culmination of years of hard work."

Venture Global has maintained that Calcasieu Pass was fully contracted after the company lined up a series of long-term supply deals. The terminal is slated to begin commercial operations in 2022. Baker Hughes a GE company announced on Aug. 20 that it had received a notice to proceed from Venture Global on the construction of the liquefaction train system, which will include 18 modularized trains. Baker Hughes said the modular system will enable faster installation and will lower construction and operational costs.

The lender group for the $5.8 billion construction financing was comprised of 13 institutions that include mainstream lenders for LNG projects. The financing will augment a $1.3 billion equity investment from the private equity firm Stonepeak Infrastructure Partners.

Some market observers and rival LNG developers had questioned whether Venture Global could make the math work for its low-cost model and secure financing for the project. Venture Global also faced questions about whether the company's engineering, procurement and construction contract for Calcasieu Pass with Kiewit Louisiana Co. left the project open to cost overruns. But the financing commitments secured in July should have settled questions about whether the project would advance, said Jason Feer, head of business intelligence at oil and gas ship broker Poten & Partners.

"It's a real challenge to other developers," Feer said at the time. "They have managed to win over offtakers. They have managed to win over the banks and lenders and funds. And they've done it their own way. Now they have to execute the project."