Venture Global liked not to ship LNG under contracts to the EU: it is more profitable on the market

Market gas prices in Europe continue to be 2-2.5 times higher than pre-crisis prices and may differ significantly from the cost at which gas is supplied under long-term contracts. Perhaps this is one of the reasons why the American Venture Global wants to extend the force majeure regime at its Calcasieu Pass LNG plant for 2025, so as not to start deliveries under long-term contracts to Europe.

"Venture Global LNG wants to extend force majeure at its Calcasieu Pass liquefied natural gas plant in Louisiana until 2025, delaying the first deliveries under long-term contracts up to three years from the start of production," Reuters reports, citing information from Venture Global in a document on the initial public offering of shares.

The Calcasieu Pass LNG plant with a capacity of 12 million tons (16.5 billion cubic meters) per year was launched in early 2023. However, all shipments went to the spot market, where lots were sold at the highest prices. At the same time, the company has not fulfilled its obligations under long-term contracts, motivating the refusal due to force majeure circumstances at the plant — problems with power equipment. The plant has not officially started commercial operation yet.

This turn led to litigation initiated by European clients: British BP, Shell, Italian Edison, Spanish Repsol, Portuguese Galp and Polish Orlen. The energy giants accused the American company of deliberately delaying the shipment in order to sell fuel on the spot market, where prices are significantly higher than contract prices during the energy crisis. Reuters estimated that by November 2023 alone, Venture Global had sold 200 cargoes with a total value of $18.2 billion and earned billions on the price difference between spot shipments and contract deliveries.

"These court cases could cost Venture Global billions of dollars if it loses," Reuters writes, referring to the Venture Global document.

Under the extended force majeure, customers will not be able to terminate their contracts after June 2025, Venture Global told potential investors. At the same time, she noted, even before that, European clients had not taken steps to terminate the agreements.

In 2025, Venture Global plans to launch another LNG plant and will become the second largest producer of liquefied natural gas in the United States. In total, the American company plans to launch three projects with a capacity of 74 million tons (102 billion cubic meters) per year.

As EADaily reported, in October, the US Federal Energy Regulatory Commission (FERC) approved the reintroduction of hazardous liquids into the heat recovery steam generator at the Calcasieu Pass LNG plant and concluded that the owner of Venture Global had taken adequate steps to eliminate problems on its project to start commercial use.

Thus, the American regulator indirectly supported the company in a dispute with European clients that the project does not yet conduct commercial activities and may not fulfill long-term contracts.