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The two industry outsiders upending LNG markets

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Venture Global LNG has shot up the ranks of gas exporters

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Customers BP, Shell say the pair flout industry norms

By Curtis Williams

HOUSTON, June 11 (Reuters) - U.S. liquefied natural gas

(LNG) exporter Venture Global LNG this year became one of the

country's largest producers of the superchilled gas and the

industry's most contentious supplier, facing contract claims by

six customers.

The duo who founded the company, co-chairs Michael Sabel and

Robert Pender, have turned the booming business upside down

through strong contracts, good timing and a business plan to

rapidly build three giant plants.

Sabel, a former investment banker, and financial lawyer

Pender, have successfully fended off accusations of self-dealing

by BP, Shell, Repsol SA, Orlen ( PSKOF ),

Galp Energia and Edison SpA. They oversee a

business aiming to produce over 100 million metric tons of LNG.

On Monday, a U.S. energy regulator sided with customers

of its first plant, ordering the pair

to turn over documents

showing why their initial Calcasieu Pass plant remains in a

commissioning phase more than two years after startup.

At issue is the company's insistence it does not have to

supply the six because their contracts allow it to decide when

the Louisiana plant is ready. Venture Global contends it is not,

even though they have been selling spot cargoes since early

2022.

Shell, BP and others say the project is producing LNG above

its 10 MTPA capacity and has profited to the tune of billions of

dollars that belong to them. They and two others have contract

arbitration claims against Venture Global.

SEIZING ON SMALL SCALE

Neither of Venture Global's owners had any experience in LNG

before starting the company. Sabel and Pender had tried

unsuccessfully in 2009 to develop a coal plant in Sri Lanka,

before getting the LNG bug.

They seized on LNG when considering how Haiti could import

small amounts of gas for its needs. Sabel felt it could work if

there were small-scale gas plants built from modular components.

"The scale had become so gigantic, risky and too expensive.

So our Eureka moment was let's bring the scale down, small

enough so you can build it (processing equipment) in factories,"

Sabel said in an interview last year.

They signed on with LNG equipment maker Baker Hughes ( BKR )

, which was developing modular trains, or chillers that

turn gas into a liquid, and are built in factories and snapped

together like Legos to more quickly start exports.

"What they did was a modular design which enabled them, from

an execution timeline, to deliver," said Lorenzo Simonelli, CEO

of Baker Hughes ( BKR ).

Sabel and Pender are "very driven professionals" who have

succeeded with their LNG dream, he said.

To bring their vision to life, however, they needed

customers willing to sign long-term contracts to convince

financiers to back their plan. That led to processing deals at

about $1.75 per million British thermal units, about 60% of the

going rate at the time. They struck deals with BP, Edison, Galp,

Repsol, Shell, and Orlen ( PSKOF ).

In a March letter to U.S. regulators, Shell said Venture

Global has flouted "LNG industry norms" by turning a routine

months-long startup process into years to keep cargoes for its

own use.

It "has abused, and is continuing to abuse, the regulatory

process to achieve its commercial objectives," Shell wrote,

pointing to the pair's sale of 257 cargoes from a plant they

claim is not ready for commercial sales.

BILLIONS IN PROFIT

The company sold that LNG on the spot market for what Shell

estimated was $48.8 million per cargo, or $29 million more than

if those cargoes were delivered under its contracts. Calcasieu

Pass collected $7.6 billion in sales through the end of 2023,

"$4.5 billion more than if sold at average prices," it told

regulators.

Venture Global CEO Sabel acknowledged its contract prices

were significantly lower than others, but he said had it been

able to sign deals at higher prices, it "would have helped us a

lot more."

He rejects Shell's contention that Calcasieu Pass was built

on the backs of its long-term contract holders and believes when

it delivers gas to those buyers by early next year, "the issue

as it relates to CP1 (Calcasieu Pass) goes away."