A rebuttal to Venture Global

OPINION:

One of the great things about writing a column is that it occasionally draws blood and the intended target responds with an ill-advised letter to the editor.

Such is the case with Venture Global LNG — an exporter of liquefied natural gas — which has refused to declare itself ready for commercial operations, yet according to reports from Reuters and others, inexplicably managed to ship 200 boatloads of liquefied natural gas to people other than its contracted customers.

After this column was rude enough to point out that Venture Global may have been doing so because its cargoes of natural gas could generate more cash on the spot market than if it simply shipped the gas to those customers with contracts, the company responded with a letter to the editor.

That is a mistake made only by amateurs. Professionals know to stop digging when the hole is already deep.

But the crew over at Venture Global felt compelled to respond. So, let’s take a look at the substance of that response.

Shaylyn Hynes, the vice president of strategic communications for Venture Global, started out by claiming that “Michael McKenna makes numerous factual errors about Venture Global. Mr. McKenna’s central claim is that Venture Global is not sending cargoes to Poland.”

Oops.

Mr. McKenna didn’t claim that at all. He did claim this: “As best as anyone can tell, Venture Global has yet to meet its contractual obligations to Poland — perhaps America’s closest ally on the European continent — or any of its other initial customers.”

Ms. Hynes carried on gamely: “To date, Venture Global has sent 13 cargoes to Poland.”

Let’s take that as true, despite the source.

None of those 13 cargoes to Poland were delivered under the long-term contractual obligations with Poland’s state-owned oil and gas company, PGNiG, according to the letter from Ms. Hynes.

Instead, they were sold on the spot market.

How much more? I contacted Venture Global by email on Monday, and again on Tuesday, and asked what size cargo ships the company used to ship LNG to Poland, but the company never responded.

So here’s a quick, comparable hypothetical based on the ship size the industry often uses:

An LNG ship typically holds about 4 billion cubic feet of liquefied natural gas.

In a similar situation, if the ships being used were of the same size, those 13 cargoes would contain about 52 billion cubic feet.

The average Henry Hub monthly spot price since May 1, 2022, has been about $4.75/MMBtu.

As cited in a recent Reuters report, long-term contracts, on the other hand, are usually priced at around $2/MMBtu.

At that price, the country receiving the LNG shipment would be paying about $100 million for the cargoes had they been delivered under the contract instead of through the spot market.

Based on this hypothetical, the extra amount paid by the receiving country could be as high as $150 million.

In her letter to The Washington Times, Ms. Hynes also wrote that “Mr. McKenna also falsely asserts that Venture Global’s long-term contracts were designed to be fully implemented by 2022.”

If Venture Global had declared commercial operation within the first two months of starting to ship cargoes of liquefied natural gas — as just about everyone else has — its contracts would have been fully realized and implemented about 16 months ago, or, as normal people like to say, sometime in 2022.

Finally, Ms. Hynes writes: “Venture Global is and will continue to be in full compliance with our contracts and all federal regulations.”

Is it really?

Just last week, Gary McWilliams and the team over at Reuters reported that the Spanish energy company Repsol asked an international tribunal to require Venture Global to fulfill its contract for liquefied natural gas or compensate Repsol.

Repsol is not alone. It is the fourth company to pursue an arbitration case against Venture Global over its failure to supply cargoes from a plant that has been running for 18 months and has shipped more than 200 cargoes into the spot market at higher prices than it would have received under long-term contracts with BP, Shell and other customers.

To borrow from Tolstoy, what then is to be done?

The regulatory regime being taken advantage of by Venture Global is under the purview of the Federal Energy Regulatory Commission. The commission could, if it decided to, suspend the permit of the company to operate its LNG export facility while a full examination of what, if anything, has gone wrong with its equipment.

Meanwhile, if you work for Venture Global, please feel free to keep those cards and letters coming.

• Michael McKenna, a columnist for The Washington Times, is the 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. He can be reached at mike@mwrstrat.com.