Repsol, Spain multinational energy conglomerate, has expressed its dismay at Venture Global’s ongoing stance that the Calcasieu Pass LNG plant has not yet entered commercial operations despite more than 12.5mmt shipped since March 2022. Repsol and other long-term customers insist this triggers their standing supply agreements whilst Venture Global preferred to sell these volumes on the spot market instead, citing equipment issues as the reason for not declaring commercial startup.
Spanish energy conglomerate Repsol said it is not anticipating receiving any shipments from Venture Global's Calcasieu Pass LNG plant in 2024.
Repsol's CEO, Josu Jon Imaz, raised the issue in his company’s third quarter earnings call on Thursday last week. Imaz highlighted that the lack of shipments would take place despite a legally binding sales and purchase agreement (SPA) for 1million tonnes per annum (mtpa).
Numerous exports
Repsol has recently become the latest customer of Calcasieu Pass LNG to initiate arbitration proceedings against developer and operator Venture Global.
To date, Venture Global has shipped close to 200 spot cargoes amounting to 12.53mmt from Calcasieu Pass but failed to provide volumes under long-term SPAs with counterparties such as Shell, BP, Edison, and Repsol.
Point of contention
The point of contention for Repsol and others lies in the interpretation of when commercial operations are to have begun.
Venture Global asserts that, owing to equipment issues, commercial operations have not yet begun, which would consequently mean any long-term SPAs have not yet come into effect.
In contrast, Venture Global’s SPA counterparties argue that the liquefaction facility has been fully operational for more than 18 months and through its numerous shipments, by definition, was commercially operational.
US government agencies
During the conference call, Imaz confirmed that Repsol had approached US government agencies inquiring about their stance on the commercial startup date of Calcasieu Pass.
However, the requested information was not provided. Due to the ongoing arbitration's confidentiality and sensitivity, the CEO indicated his inability to provide further comments on the contractual dispute with Venture Global.
Unclear terms
Nevertheless, Upstream reported its sources revealed Repsol has been left irritated by Venture Global's actions, firmly believing that the integrity of their binding SPA has been violated.
Moreover, term customers of Calcasieu Pass LNG are reportedly perturbed that their contracted volumes continue to be sold on the spot market, often at a substantially higher price.
Repsol and Venture Global initially entered a 20-year SPA in September 2018 for the supply of 1.0mtpa from the Calcasieu Pass LNG in Cameron Parish, Louisiana.
Repsol was to procure volumes on a free-on-board basis, starting from the LNG project’s commercial operation date. At the time, that date was scheduled to be in 2022.
Ripple effect
The disagreement between Venture Global and its term customers points to a fundamental flaw in long-term SPAs as the term commercial startup seems to have been insufficiently defined.
If these terms form part of a template, customers that have signed up for fixed volumes from other Venture Global projects currently under construction – Plaquemines, Delta LNG and CP2 LNG – are thus likely to review their own terms and may seek to renegotiate them.
A source speaking to Upstream further highlighted the experiences with Calcasieu Pass’ terms may also lead to a rethink in the structuring of future LNG contracts elsewhere.
