OPINION:
The energy world is characterized by large, capital-intensive facilities that sometimes take decades to finance, permit and build. Consequently, it is a cause for concern when someone in the industry — whether colleague or competitor — takes advantage of the complexity and timelines to line their own pockets.
It is made even worse when that gaming of the system impairs our nation’s ability to provide reliable allies with the energy they need.
Let’s take one example. In 2018, in a prudent effort to reduce Poland’s dependence on natural gas from Russia, the country’s natural gas company signed agreements with a handful of companies in the United States to provide natural gas to Poland.
The gas company’s timing was good. The contracts were designed to be fully implemented by 2022, just as the Russians invaded Ukraine and disrupted European energy markets. Poland was one of the first nations to suffer; the natural gas supply from Russia was stopped in April 2022.
While the company’s timing was good, its selection of companies was suboptimal. One of the U.S. companies from which Poland arranged to buy liquefied natural gas was Venture Global LNG. Like many American companies selling liquefied natural gas, Venture Global scrambled to permit, finance and build the facilities necessary to export LNG.
An expensive and lengthy proposition, it cost as much as $5 billion, and obtaining the necessary licenses took years.
Venture Global was fortunate enough to have a variety of initial customers, including companies in Spain, France and other European countries. These first customers were essential in securing funding and obtaining required permits. In turn, these customers were promised steady supply and affordable prices.
Unfortunately, it hasn’t worked out that way. As widely reported by news outlets such as Reuters, the company is facing several arbitration cases, including one from Shell “over its failure to supply fuel under long-term contracts even as it has shipped at least 190 cargoes to non-contract customers.”
One of the issues at hand is that Venture Global has reportedly not met its contractual obligations to Poland — perhaps America’s closest ally in continental Europe — or any of its other initial customers. The company has reportedly told these customers that it has been unable to achieve commercial operations and therefore does not have to meet its obligations to provide natural gas to them at the agreed-upon terms and prices.
At the same time, Venture Global has loaded, shipped, exported and unloaded 180 cargoes of LNG to more than 20 locations around the world. It appears that none of these cargoes has been used to meet any of the long-term agreements with the company’s initial customers.
In short, the company has used the claim that its facility is not yet sufficiently operational to divert cargoes away from its contractual partners and toward the more immediately lucrative — especially in the wake of the Russian invasion of Ukraine — international spot market for LNG.
Running a series of test cargoes is not unusual; many companies do it. In fact, the other six companies that have started operations at new LNG facilities recently have loaded, transported and unloaded more than 60 test cargoes combined before they concluded they were ready for commercial operations.
In comparison, since March 2022, Venture Global has “delivered at least 177 cargoes valued at $15.3 billion through May, according to a Reuters tally,” or more than three times as much as the other liquefied natural gas companies that recently started operations combined.
It strains credibility to imagine that a LNG facility could deliver 177 cargoes across the globe over almost 18 months (one every three days), while still contending that it has not, and somehow cannot, achieve commercial operations and deliver on its contracts.
Obviously, the world will come to its own conclusion about whether Venture Global can provide the LNG that it promised to provide to its earliest customers and to our strategic allies in Europe and elsewhere.
In the meantime, federal regulators should take a hard look at the business and operational practices of Venture Global. The regulators should reflect carefully on whether the company is being truthful, and they should think about the dimensions of war profiteering.
Then they should do something about it.
• Michael McKenna, a columnist for The Washington Times, is president of MWR Strategies. He was most recently a deputy assistant to the president and deputy director of the Office of Legislative Affairs at the White House and can be reached at mike@mwrstrat.com.
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