Analysis-New LNG plant to boost Venture Global profits as Calcasieu serves long-term customers

By Curtis Williams

HOUSTON (Reuters) – Venture Global Inc is about to start selling liquefied natural gas cargoes from a Louisiana export terminal to long-term customers rather than to the highest global bidder, but it plans to employ the controversial but lucrative practice at a new and bigger terminal that it is starting up.

On April 15, Venture Global will finally complete commissioning its Calcasieu Pass facility in Louisiana, which binds it to contractual obligations it signed while developing the facility.

Commissioning, or making sure a new plant’s systems are functioning as designed, takes months at many LNG facilities. It took three years at Calcasieu Pass, allowing Venture Global to sell large test cargoes to high bidders on the red-hot global market instead of to customers whose contracts called for them to pay less.

Shell, BP, Orlen, Edison and Repsol have filed arbitration claims saying Venture Global deliberately failed to fulfill their supply contracts, dragging its feet to commission the plant so it could profit from higher spot prices. Venture Global argued that a faulty power system delayed normal operations.

With commissioning of Calcasieu Pass imminent, Venture Global’s newer and larger Plaquemines LNG plant is ramping up production for the lucrative spot market. It started producing in mid-December. Venture Global says it will commission the plant in two-year phases, a timetable analysts say will boost its profit outlook.

“We still expect the vast majority of sales will be done on the spot market in 2025” for Venture Global, said Adam Baker, an energy analyst at research firm Morningstar.

Plaquemines is now producing at 140% of design capacity and in three months has already sold 29 cargoes at an average liquefaction fee of $7.26 per million British thermal units (mmBtu), according to an SEC filing last Thursday.

“One can reasonably see the company’s overall revenue increasing from LNG sales on the spot market from Plaquemines, and some revenue from Calcasieu Pass”, said Jason Feer, Poten and Partners’ business intelligence chief.

Venture Global’s revenues from LNG should double to $9.98 billion in 2025 from $4.972 last year, and keep growing through 2029 on larger volumes and strong prices, investment bank UBS said in a note to its clients last Friday.

The company expects to sell 550 cargoes on the spot market during the commissioning period from Plaquemines, with a margin of $5 to $6 a mmBtu, generating between $10 and $12 billion, UBS told investors.

Exxon Mobil, Chevron, and Orlen are among contracted customers for LNG supply from the Plaquemines facility but did not respond to a request for comment.

Shell, which also has 2 MTPA in Plaquemines, declined comment. A person familiar with the company’s position told Reuters Shell was bracing for another long commissioning period and possible delays in receiving its LNG.

Venture Global did not immediately comment. Venture Global is the second largest U.S. LNG exporter behind Cheniere. Export sales boomed for both as the U.S. became the world’s largest global supplier of the supercooled gas following Russia’s invasion of Ukraine.

CALCASIEU LEGAL FIGHT

Venture Global earned more than $19 billion from LNG sales on the spot market over the past three years, almost entirely from its Calcasieu Pass facility, SEC filings show. That terminal’s margins will shrink starting April 15, when it will start supplying long-term customers.

Contracted liquefaction fees at Calcasieu Pass are among the lowest on the Gulf Coast at around $1.75 per million British thermal unit (mmBtu), two people familiar with the agreements told Reuters.

Venture Global warned investors in its initial public offering that revenue from Calcasieu Pass will fall when it moves to commercial operations.

Contracted customers have waited years to access the lower-cost cargoes. But Shell, Orlen and Repsol have all said they will continue their legal battle with Venture Global even after they start receiving cargoes.

“We hope to be able to have some readout from the arbitration in the coming months, hopefully, this year,” said Shell’s CEO Wael Sawan last month at the company’s Capital Market’s Day in New York.

Orlen’s Chief Financial Officer Magdalena Bartoś and Repsol’s CEO also confirmed in separate earning calls last month that their companies were continuing the arbitration process.

Orlen, which has contracted 2 MTPA from Calcasieu Pass, said it expects its first cargo from the facility on April 23.

Repsol plans to trade the low-priced LNG from Calcasieu and resell it in Europe or Asia if the prices are right, CEO Josu Jon Imaz said during the company’s earnings call last month.

Calcasieu “is a quite competitive LNG plant in cost terms, probably one of the best of the Gulf,” Imaz said.

Shell also intends to sell its contracted LNG supplies from Calcasieu, a Shell source told Reuters.

(Reporting by Curtis Williams in Houston, Marwa Rashad in London and Marek Strzelecki in Warsaw; Editing by David Gregorio)