NEW YORK/LONDON, Sept 19 (Reuters) – U.S. liquefied natural gas (LNG) company Venture Global LNG has sold more than 200 cargoes of LNG worth about $18.2 billion since its first plant exporter started operations in March 2022, according to vessel and gas price data from Reuters. calculations.
Those shipments have become a flashpoint for gas buyers and traders who insist they should have received some of the supplies under long-term contracts for Venture’s Calcasieu Pass export plant Global in Louisiana. There have been at least three contract arbitration cases filed this year.
WHY IS IT IMPORTANT?
The conflict has shed light on what constitutes an appropriate commissioning period. Shell, BP, Edison and Repsol claim they were unfairly deprived of cargoes sold to others.
Venture Global says equipment failures related to on-site power generation have made its approximately 11 shipments per month “pre-commissioning shipments,” 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 did not specify if that remains his planned start date.
The question of officially commissioning a plant has led other LNG developers to clarify their commissioning periods. New factories typically set a two- to three-month period during which “pre-commercial” shipments can be sold.
WHERE DID ALL THE CARGOES GO?
Since it began exports in March 2022, Venture Global has sold about 200 cargoes worth about $18.2 billion through the end of August 2023, according to Reuters calculations from data on natural gas prices from the financial company LSEG.
About two-thirds of those cargoes, or about 130, were sold for about $13.6 billion in Europe. Another 30 or so were sold in Asia and the remaining 40 went to Central America, South America and the Caribbean.
WHAT WERE THE GAS PRICES WHEN THESE CARGOES WERE SOLD?
Gas futures from the Dutch Title Transfer Facility (TTF), the European benchmark, soared to $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 more than 100 cargoes in 2022, according to U.S. Energy and LSEG ship tracking data, with about 70% of the LNG destined for Europe where prices were higher than in Asia. The remaining cargoes were split almost equally between Asia and Latin America.
Gas futures from March to December 2022 averaged $43 per mmBtu at the TTF hub in Europe and $35 at the Japan Korea Marker (JKM) benchmark in Asia, according to LSEG data.
Venture Global also sold around 100 cargoes between January and August 2023. Around 60% of these cargoes went to Europe in the first eight months of this year. Latin America received about 25% of cargoes and Asia about 15%.
Gas prices from January to August 2023 averaged $13 per mmBtu at TTF in Europe and $14 at JKM in Asia, according to LSEG data.
The highest valued cargo based on benchmark gas prices was destined for Croatia in August 2022, valued at approximately $266 million. This, however, may not be what Venture Global received for the cargo since the company did not disclose how much it received for its LNG.
WHICH BUSINESSES HAVE BEEN HIT?
In 2016, Shell agreed to purchase 1 million metric tons per year (MTPA) of LNG over a 20-year period from Calcasieu Pass. BP signed an agreement in 2018 for 2 MTPA of LNG over 20 years.
Under both agreements, supply was to commence on the date of commercial operations.
Early customers of new projects typically benefit from favorable gas processing fees, which at the time of signing by Shell and BP stood at around $2 per mmBtu, analysts say. Since then, industry fees have climbed to around $2.75.
Shell and BP could receive around 30 cargoes each year, according to analyst estimates.
“It is unlikely that buyers would have been able to plateau on their contract within the first year,” said Kaushal Ramesh, Rystad Energy vice president for LNG research.
But assuming they got half the quantity from the tray, that would have been 15 shipments each, Ramesh said.
In July, Italy’s Edison, which signed a 20-year deal for 1 MTPA of LNG in 2017, blamed the 7% drop in first-half profit on the US producer’s lack of LNG deliveries. (Reporting by Marwa Rashad in London and Scott DiSavino in New York; Additional reporting by Francesca Landini in Milan; Editing by Marguerita Choy)