Venture Global LNG, a U.S.-based liquefied natural gas (LNG) producer, is facing accusations of failing to meet its contractual commitments, primarily due to delays attributed to technical issues at its Calcasieu Pass plant. , in Louisiana. According to its customers, including Shell and BP, the company refused to deliver LNG cargoes despite a partial start of production. The disagreement centers on the status of the facility, with Venture Global saying the plant has not yet reached full operational capacity and is still in the “pre-commissioning” phase.
This situation led customers to file complaints, arguing that Venture Global used this justification to maximize its sales in the spot market, where LNG prices were higher. The plaintiffs claim that the company thus generated additional revenue while depriving long-term buyers of cargo at pre-established rates, thus causing significant economic losses.
FERC Support for Venture Global Practices
The Federal Energy Regulatory Commission (FERC) recently released a report indicating that Venture Global took adequate steps to diagnose and resolve equipment performance issues. The regulator specifies that the delays in delivery are justified by the technical work in progress and that the company respected the safety and commissioning standards of the installation. This support partially contradicts accusations of manipulation and bad faith made by Shell and BP, who maintain that the installation could have been optimized to respect the terms of the contracts.
This FERC position is a turning point for Venture Global, as it could influence the outcome of ongoing arbitrations. However, the report does not put an end to the disputes, because the plaintiffs believe that the volumes of LNG delivered to the spot market far exceed those justified by a “pre-commissioning” phase. For Shell and BP, Venture Global’s argument does not take into account possible adjustments that would have made it possible to satisfy, even partially, the needs of the contracted buyers.
Consequences for the American LNG market
Tensions between Venture Global and its partners could affect the reputation of American exporters in the international market. LNG buyers are increasingly looking for reliable and transparent suppliers to secure their long-term supplies, particularly in Asia, where demand is growing. An unfavorable outcome for Venture Global in these disputes could discourage potential investors and buyers, to the benefit of competing players in Qatar, Russia or even Australia.
The timing is all the more crucial as Venture Global is set to launch a new LNG terminal in Louisiana, set to become the second-largest LNG production site in the United States. If the company can overcome these conflicts, it could strengthen its position among the top U.S. exporters. However, any further disruptions or controversies could jeopardize expansion plans and result in loss of market share.
Insights for customers and regulators
The plaintiff companies, including Shell and BP, have stepped up their pressure for financial compensation for the missing cargoes. They fear that Venture Global’s failure to meet its commitments could set a precedent and weaken contractual security across the LNG sector. Conversely, if regulators continue to support Venture Global’s practices, this could encourage other producers to use pre-commissioning phases as an argument to delay the delivery of their cargoes, which would introduce additional instability on the market.
For regulators like FERC, this case is a test of their ability to arbitrate between the protection of long-term customers and the operational flexibility of producers. The challenge is to find a balance that ensures both security of supply and profitability of LNG projects while preserving the confidence of international investors.
