Venture Global has written to its long-term contract partners in the Plaquemines LNG plant to assure them it will not sell LNG on the spot market before honoring these contracts, the Financial Times has reported, citing fears of contract breaches.
Plaquemines clients fear a repeat of what Venture Global did with its first LNG plan, in Calcasieu Pass, where it delayed the official commissioning of the facility for years, while selling LNG produced there on the spot market.
The move, made possible by a legal loophole that allowed Venture Global to delay honoring its long-term contracts only after the plant as officially commissioned, prompted a flurry of lawsuits by clients including Shell, BP, Eni, and Repsol.
On one of these, with Shell, the arbitration court ruled in favor of Venture Global but in the second to deliver a ruling, the court sided with BP. This prompted fears among shareholders that more unfavorable rulings may follow in the other arbitration cases, leading to hefty compensation payouts. The U.S. LNG producer is facing a compensation bill of more than $1 billion under the BP suit.
The fact that Venture Global asked the Federal Energy Regulatory Commission to delay the official commissioning of Plaquemines did not help client trust. FERC granted the permission for the delay on Thursday.
“Venture Global stands to make over double the revenue by selling cargoes on the spot market compared to selling under their long-term contracts,” MST Marquee’s head of energy research, Saul Kavonic, told the FT.
Indeed, the report noted that Venture Global had already sold 100 cargos from the Plaquemines facility on the spot market.
“Our request for an extension is a case of aligning our permits with our actual construction schedule,” Venture Global said. “To be clear, this request will have no impact on our expected commercial operations date, which remains unchanged from what has been communicated and agreed upon with our customers.”
By Irina Slav for Oilprice.com
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