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    Venture Global’s LNG plans pick up pace [Gas In Transition]

Summary

Venture Global LNG has started securing buyers for CP2, which would be its third terminal on the US Gulf Coast, amid a flurry of new offtake agreements for US LNG [Gas in Transition, Volume 2, Issue 5]

by: Anna Kachkova

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Venture Global’s LNG plans pick up pace [Gas In Transition]

Momentum is picking up for Venture Global LNG as it advances plans to build multiple LNG export terminals on the US Gulf Coast in Louisiana. This can be illustrated by the company’s latest sales and purchase agreements (SPAs), which were announced in quick succession on May 10 and 11. Venture Global said it had executed two long-term SPAs with ExxonMobil LNG Asia Pacific covering a combined 2mn metric tons/year of LNG. This was followed by a separate announcement about a 20-year SPA with a unit of Malaysia’s state-owned Petronas.

Notably, the SPAs with ExxonMobil covered offtake not only from Plaquemines LNG, on which a final investment decision (FID) is expected soon, but also CP2 LNG. This is the second supply agreement for CP2 – the first was struck in March with New Fortress Energy. Venture Global said construction on CP2 was expected to begin in 2023. The company did not reply to NGWs enquiries about its latest deals.

Racing ahead

Whether Venture Global succeeds in launching construction on CP2 in 2023 as it aims to depends on whether it receives authorisation from the US Federal Energy Regulatory Commission (FERC) by next year, among other factors. The company only submitted its application to FERC in December 2021, and is prioritising CP2 ahead of another proposed terminal in Louisiana, Delta LNG, for which an application was submitted to FERC in 2019.

If Venture Global ultimately succeeds in building all of the liquefaction capacity it currently has planned for Louisiana, though, it would become the US’ largest LNG exporter, with four export terminals and a combined capacity of 70mn mt/yr. Today, Cheniere Energy is the largest exporter in the US, with a combined capacity of 45mn mt/yr across two terminals.

Venture Global is betting on its modular approach to rapidly bring new liquefaction plants online. The company’s existing terminal, Calcasieu Pass LNG, came online earlier this year, going from LNG to production in 29 months. Venture Global says this is the fastest a large-scale greenfield LNG facility has ever been built.

The 10mn mt/yr Calcasieu Pass facility consists of 18 liquefaction trains, each with a capacity of 626,000 mt/yr, configured in nine blocks. Venture Global’s other LNG terminals would replicate this design, but on a larger scale – each of its other three proposed facilities has a capacity of 20mn mt/yr.

When the latest SPAs were announced, the company said that 16mn tonnes/year of capacity at Plaquemines were now covered by sales contracts. It had previously said that FID on the project was coming “soon”, and the recent deals take it even closer to this point. But by also agreeing to sell volumes from CP2 shows that it wants to advance more than one project at a time, perhaps in a bid to take advantage of the current appetite for US LNG.

“They are pushing to get to FID with CP2,” Poten & Partners’ head of business intelligence, Jason Feer, tells NGW. “Part of their strategy is that they can offer some bridging volume from their other projects, so in exchange for taking long-term contracts at CP2, they may be able to offer some volume from [Calcasieu Pass] and/or Plaquemines, which will come online earlier.”

Multiple projects

Venture Global is not the only US LNG developer to be announcing deals for offtake from more than one terminal right now and using such a strategy to advance multiple projects. On May 16, Sempra Infrastructure said it had signed a heads of agreement (HoA) with Poland’s PGNiG for the purchase of 3mn mt/yr of LNG over a 20-year period.

Under the preliminary agreement, 2mn mt/yr would come from the planned expansion phase at Cameron LNG in Louisiana, and 1mn tonnes/year from the proposed Port Arthur LNG terminal in Texas.

Sempra said in its announcement that the HoA provides PGNiG the opportunity to reallocate volumes from the Cameron LNG Phase 2 project to the Port Arthur project in 2022. This is noteworthy, because the two companies previously had an SPA for 2mn mt/yr from Port Arthur. However, after a series of setbacks to that project, they struck a non-binding agreement in mid-2021 to shift those volumes to other terminals in Sempra’s portfolio – namely Cameron and the under-construction Energía Costa Azul LNG facility in Mexico. At the time, plans to develop Port Arthur appeared to have dropped to the back of the queue while the company prioritised the single-train Phase 2 at Cameron. But the recent announcement shows a renewed interest in progressing Port Arthur more quickly, and a strategy similar to Venture Global’s for moving two projects forward at the same time.

“Because Sempra has several projects in various stages of development, it can offer buyers some early volumes as projects farther along in development come online,” says Feer. “This is a real advantage over competitors who might only have one facility in the project pipeline. This is particularly attractive to European buyers, who may not be able to secure term volumes until 2026 or beyond if they decide to go with another sponsor that only has a single project in the works.”

Growing appetite

It is not surprising that US LNG developers wish to capitalise on the high levels of interest in offtake from their projects. Other Gulf Coast LNG developments that had previously appeared stalled are also now picking up momentum and have announced new SPAs in recent weeks, including NextDecade’s Rio Grande LNG and Energy Transfer’s Lake Charles LNG.

What has been striking about this slew of SPAs is that the majority have involved Asian buyers rather than European ones, despite the European scramble to cut dependence on Russian gas in the wake of the war in Ukraine.

“I would say that aside from Engie [with NextDecade] and PGNiG, there have been virtually no European contracts,” says Feer. “Almost all of the contracts have been with Asian buyers, and a few with aggregators. Asian buyers see that prices are going up and that Europeans could come into the market. Many of them have been negotiating for years so they were ready to make a decision when the war broke out. European buyers will take longer to make deals, if they make deals at all.”

There are potential complications when it comes to selling LNG to Europe over the long term, given the European Union’s commitment to achieving net zero greenhouse gas (GHG) emissions by 2050 and the uncertainty over how gas will fit into that. SPAs that begin in the mid-2020s would expire close enough to the 2050 deadline that they could end up at risk from stricter environmental policy at that point. According to Feer, options for overcoming this challenge could include striking SPAs with a shorter duration, or selling to aggregators such as Shell and BP. Such aggregators would have the ability to redirect those volumes to other markets if gas falls out of favour in Europe again in the 2040s.

On the other hand, US LNG is back in favour in Europe at least in the shorter term. Given that the alternative is relying on spot LNG purchases at a time of high prices, further SPAs with European buyers appear likely. The question now is one of how many further US LNG projects will contract sufficient volumes to proceed to FID.

“What we are seeing now – and this could change – is that a lot of projects are getting some of the volume they need. But only a couple have gotten enough volume to go to FID,” says Feer. “So, the question is how many projects can reach critical mass.”