Edison launches Calcasieu Pass arbitration: Correction

Corrects contractual delivery deadline

Italian energy group Edison has launched arbitration proceedings against US developer Venture Global LNG, claiming that delays in the delivery of contracted LNG supplies from the US' 12mn t/yr Calcasieu Pass facility in Louisiana are unjustified.

Edison confirmed that Venture Global had told the US' Federal Energy Regulatory Commission (Ferc) that the start to deliveries of its contractual LNG cargoes from the facility had been postponed to the first quarter of next year because of longer commissioning times for some of the terminal's liquefaction trains.

The Italian firm said it believed such a delay was "unjustified" and "intolerable" and had forced it to open proceedings at the London Court of International Arbitration in May.

Edison signed a long-term deal in 2017 to buy 1mn t/yr of LNG from the Calcasieu Pass plant on a fob basis over 20 years. The facility initially was expected to start operations in 2021 but commissioning delays pushed this back. The deadline for delivery to Edison is the end of September this year, and Venture Global had declared force majeure because of its inability to meet its commitments, sources close to the matter said.

The long-term offtake deals for Calcasieu Pass supply — signed ahead of the terminal reaching a financial close — are dependent on the terminal being commissioned and its liquefaction blocks placed into long-term service.

Calcasieu Pass started producing LNG in January 2022, bringing its nine liquefaction blocks on line incrementally over January-July of that year. Venture Global received permission from Ferc to place the first four of its nine liquefaction blocks into long-term service in May 2022. But the operator has yet to declare the start of commercial operations at the liquefaction project despite continuing to export cargoes, fellow long-time purchase deal holder Repsol said in April in a regulatory filing to Ferc, reiterating this in another filing earlier this month. Repsol has sought access to communication between Venture Global and Ferc.

Other US liquefaction trains typically have required a few months from first LNG production to placement into long-term service, although much of the liquefaction capacity in the country has come in the form of larger trains that have capacities of about 5mn t/yr each, with the exception of the 4mn t/yr Elba Island facility. This is in contrast with Calcasieu Pass' approach of 18 modular trains that are grouped into nine liquefaction blocks.

Venture Global offered a stern rebuttal in response to an Argus request for comment, saying it "remains in full compliance with all obligations under our long-term contracts, including timing". The firm criticised what it called a "co-ordinated public relations campaign in an attempt to damage Venture Global's reputation and gain commercial leverage", asserting that the allegations made are "not in line with the truth".

The operator also said the modular configuration of Calcasieu Pass requires "substantial testing and a phased commissioning process" before it can be deemed ready to meet its contractual supply obligations. This testing process differs from that at other facilities, it said. The terminal has also experienced a "challenge" with its heat recovery steam generators, Venture Global said.

In addition to Repsol and Edison, several other firms hold long-term deals for Calcasieu Pass supply — Shell, BP, Portugal's Galp, China's Sinopec and CNOOC, and Poland's PGNiG.

Edison had planned to use the US LNG to replace Russian gas supplies, which accounted for 7pc of its supply portfolio before they were stopped last year following the outbreak of the Russia-Ukraine conflict. Edison confirmed its commitment to meet customer demand and guarantee Italian security of supply, thanks to its long-term diversified gas portfolio.

By Stephen Jewkes and Samuel Good