Venture Global LNG is poised to commence liquefied natural gas (LNG) production at its Plaquemines export facility in Louisiana this week, marking a significant milestone for the U.S. energy sector. This achievement positions Venture Global as the first new U.S. LNG producer in two years, outpacing Cheniere Energy’s Corpus Christi expansion project. The start of production initiates a commissioning period, expected to last up to two years, during which Venture Global retains all revenue generated from LNG shipments.
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First New US LNG Production in Two Years
The Plaquemines plant, with a capacity of 20 million metric tons per annum (MTPA), is projected to utilize over 100 million cubic feet (mmcfd) of natural gas daily. Recent regulatory approvals granted by U.S. authorities permit Venture Global to commission its sixth block at Plaquemines, each comprising two trains and consuming 150 mmcfd of gas. This authorization signifies a crucial step towards full operational capacity.
Extended Commissioning Period and Contractual Implications
The commissioning period, extending through 2026 for the first phase and 2027 for the second, allows Venture Global to optimize plant operations and generate revenue before transitioning to commercial operation. However, this extended timeframe implies that some long-term contract customers may experience delays of up to two years in receiving their LNG cargoes.
Similar delays at Venture Global’s Calcasieu Pass facility have resulted in contract disputes with major energy companies, including BP, Shell, Edison, Repsol, and Orlen, leading to arbitration proceedings. These disputes, if resolved unfavorably for Venture Global, could entail significant financial liabilities.
Venture Global’s Business Strategy and Market Dynamics
Venture Global’s strategy of securing sales contracts prior to commercial operation has facilitated financing for the Plaquemines facility. However, the company has leveraged opportunities in the spot market to enhance profitability during the commissioning phase, arguing that optimal operating conditions are not yet established, thereby relieving them of immediate contractual obligations.
This approach has drawn criticism from Shell, which has labeled Venture Global an “unreliable supplier.” Other major customers, including Exxon Mobil, EDF, Petronas, and Chevron, have declined to comment on the matter. Venture Global, in response, has defended its business model, emphasizing its transparency with customers, regulators, and financial stakeholders. The company has also pointed to delays in Shell’s Canada LNG project as evidence of hypocrisy.
Financial Performance and Future Outlook
Venture Global’s first LNG plant, in commissioning since March 2022, has generated substantial profits through spot market sales. Through December 2023, the company sold 360 cargoes, realizing operating profits of $8.4 billion.
Despite cost overruns exceeding $2.3 billion at Plaquemines, Venture Global aims to operate the plant at 15% above its nameplate capacity. However, the company has not secured new customer contracts since June 2023, coinciding with reports of an arbitration case with Italian energy company Edison.
Conclusion
The commencement of LNG production at Venture Global’s Plaquemines plant signifies a crucial development in the global LNG market. While the extended commissioning period and ongoing contract disputes present challenges, the project’s financial performance and ambitious production targets underscore Venture Global’s significant role in the evolving energy landscape. The company’s strategy and its impact on the LNG market warrant close monitoring in the coming years.
