Galp assessing all options regarding Venture Global LNG delivery delay

Portuguese energy firm Galp is assessing all options regarding its contractual rights following a delay in liquefied natural gas deliveries from Venture Global LNG’s Calcasieu Pass plant in the United States.

Asked about the delay in LNG volumes from Venture Global’s Calcasieu Pass plant, Galp’s Rodrigo Vilanova told analysts during the company’s second-quarter conference call on Monday that the company is “clearly very disappointed”.

“So according to publicly available information, they have already produced and sold well over 170 LNG cargoes so far, but they claim to be under commissioning still,” he said.

“And we understand all those cargoes, over 170, they have been sold in the short-term markets to whoever pays more as opposed to delivering under the long-term contracts signed by foundational customers such as Galp who helped underpin the project,” Vilanova said.

He said that Galp is “actively engaged with the counterparty and is assessing all options to pursue the effectiveness of our contractual rights.”

Galp is not considering any Venture Global volumes in 2023, according to Vilanova.

Back in 2018, US LNG exporter Venture Global and Galp entered into a 20-year sales and purchase agreement (SPA) for the supply of one million tonnes per annum (mtpa) from the Calcasieu Pass plant.

Edison launched arbitration proceedings

Italian energy firm Edison, a unit of EDF, recently said that its profit declined in the first half due to the delay in LNG deliveries from Venture Global.

Edison said it launched arbitration proceedings in May this year against Venture Global at the LCIA in London, for the failure of LNG deliveries from the US.

Edison previously agreed to buy 1 mtpa of LNG for a period of 20 years from Venture Global’s Calcasieu Pass LNG export facility in Cameron Parish, Louisiana.

Spain’s Repsol also signed a 20-year SPA with Venture Global for 1 mtpa of LNG from the same plant.

The firm recently asked the US FERC for a rehearing over its previously denied motion to secure access to filings regarding the commissioning of the plant.

Shell’s CEO expects both sides to honor the SPA

Energy giants BP and Shell also reportedly launched arbitration proceedings against Venture Global regarding the delay in LNG cargo deliveries.

BP and Shell each have 20-year deals with Venture Global for 2 mtpa of LNG from the Calcasieu plant.

Last week, Shell’s CEO Wael Sawan told media representatives during the company’s second-quarter call that Shell expects both sides to honor the existing SPA.

“And right now, we don’t see that happening, so we’re taking the appropriate measures to be able to protect our rights,” he said.

“In particular, in times like this, when we are trying to make sure that LNG is flowing around the world, to meet the needs of many, I think we need to be able to make sure that all agreements are honored, and we look forward to being able to realize that through the appropriate channels,” he said.

Reuters also on Tuesday cited BP’s CEO Bernard Looney as saying that BP will defend its rights in an arbitration case against Venture Global.

“You can expect us to defend our legal rights to the absolute fullest,” Looney said.

First cargo left in Q1 last year

Calcasieu Pass produced its first LNG on January 19, 2022, moving from FID to LNG production in 29 months, and the first commissioning cargo left the facility on March 1.

In July last year, Venture Global received FERC approval to introduce fluids into the Block 9 liquefaction modules at its Calcasieu Pass plant.

With this, Venture Global received approvals to commission all the 18 modular units configured in 9 blocks.

The plant has a capacity to produce 10 mtpa of LNG or 1.3 billion cubic feet per day (Bcf/d).

Besides Galp, Shell, BP, Edison, and Repsol, Calcasieu Pass has contracts with PGNiG, Sinopec’s unit Unipec, as well as CNOOC.

“Phased commissioning process”

In March this year, Venture Global said it had shipped 128 commissioning cargoes from its Calcasieu Pass plant since the first quarter of last year, mostly to Europe, while the firm still works to launch commercial operations at the facility.

“As a first-of-its-kind facility, Calcasieu Pass’s commissioning process has looked different than any other American LNG facility to come before it,” the firm told FERC in a filling.

“In particular, because of its modular, midscale design and on-site power generation (among other reasons), the facility requires substantial testing and a phased commissioning process before it can be expected to be fully operational and confirmed to be prepared to reliably meet its long-term contractual obligations,” Venture Global said.

While Calcasieu Pass is able to produce LNG, it remains in the commissioning phase because it continues to face “periodic reliability challenges impacting the facility,” it said.

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