Venture Global LNG Inc. could be facing more legal proceedings from contract holders as the prolonged commissioning process of its Calcasieu Pass LNG facility continues to drag on.
Shell plc and BP plc reportedly have filed for arbitration with Venture Global at the London Court of International Arbitration (LCIA) for failing to supply the firms with their contracted cargoes, Reuters reported, citing anonymous sources.
BP and Shell each hold 2 million metric tons/year (mmty), 20-year contracts for offtake from Calcasieu Pass. The commercial in-service date of Calcasieu Pass initially was expected in 2022 after BP signed on as a customer in 2018.
A Shell spokesperson told NGI the company had no comment. Similarly, a BP spokesperson said the firm had “no comment on the existence or status of any arbitration proceedings.”
Conventional liquefied natural gas plants generally take months to commission. The first phase of Calcasieu Pass, for 10 mmty, uses modular technology designed to advance the smaller 18 liquefaction trains in phases.
Venture has sold 11.2 million tons (Mt) of LNG in the spot market, mostly delivered to Europe, since commissioning began last year, according to data from Kpler. In March, the Virginia-based company in a filing with FERC said it had experienced technical issues at the facility that required the commissioning process to be extended while its equipment provider, General Electric Co., made repairs.
Calcasieu Pass exports hit a 10-month low of 0.58 Mt in June, which indicates a possible decline in volumes while work is ongoing, according to Kpler. Calcasieu Pass could be on track to deliver at least 0.36 Mt in July, according to the firm’s predictive data.
The Oxford Institute for Energy Studies’ Agnieszka Ason, senior visiting research fellow, told NGI the situation highlights the complications that may arise in LNG supply contracts and why they require a high level of detail from both parties beforehand.
“Disputes may arise, for example, over the scope of the seller's obligations to commission the relevant facilities before the commercial start date,” Ason said. “Commissioning provisions are rarely comprehensive. However, they may include restrictions and different commercial terms.”
For example, she said, they could include “setting the price for commissioning LNG at a premium to the contract price.“
Another Calcasieu Pass contract holder, Italy’s Edison SpA, reportedly filed for arbitration with the LCIA in May. The firm signed a 20-year, 1 mmty sales and purchase agreement (SPA) in 2017.
In April, Madrid-based Repsol filed a motion to participate in the Federal Energy Regulatory Commission's ongoing oversight of the project and expressed concerns about the commercial delays at the terminal, but it was ultimately denied access. Repsol had argued in June against FERC’s denial in a request for rehearing. It holds a 20-year SPA for 1 mmty from the Louisiana terminal. Venture Global has not publicly commented about the reports. However, the legal team in filings to FERC called Repsol’s request to participate in regulatory oversight “both absurd and disrespectful of the Commission’s expert staff.”
