US LNG export project secures US$13.2Bn in funding

In a clear sign of confidence in the LNG market outlook, 19 commercial banks are backing Venture Global LNG’s Plaquemines LNG export project with US$13.2Bn in funding. Disclosed in May, the deal for the 13.33 mta American LNG export facility is the largest ever project financing raised in a single phase for a US liquefaction scheme and the largest project financing transaction to close so far this year, globally, according to Poten & Partners.

This is the first US LNG project finance transaction to reach financial close since Venture Global obtained US$5.8Bn of funding for its 10-mta Calcasieu Pass LNG project in August 2019. Calcasieu Pass LNG loaded its first LNG cargo on the Maran Gas-owned Yiannis under a charter with JERA earlier this year.

“Calcasieu Pass now holds the global record for the fastest large-scale greenfield LNG facility to ever be built, moving from FID to LNG production in just 29 months. It is also one of the first greenfield LNG export projects to ever be constructed in the United States,” said Venture Global LNG in a press statement.

Poten & Partners says the 19 commercial banks involved in the Plaquemines LNG deal included the 13 banks that provided funding financial close to Calcasieu Pass LNG. Additionally, Plaquemines LNG project was able to secure more attractive financial terms than Calcasieu Pass LNG because it was Venture Global’s “second project, so it is a bit de-risked in terms of construction,” said one banker, noting that lack of a track record had been a concern for some lenders for the first project.

Located in Cameron, Louisiana, the Calcasieu Pass LNG export facility is unusual because it was built with factory-constructed modules. The facility has 18 liquefaction trains, each with a capacity of 0.626 mta, configured in nine blocks. The export facility has two ship-loading berths and two 200,000-m³ full containment LNG storage tanks. By year’s end, it is expected that Calcasieu Pass will be at full production capacity.

“Speed to market is now in focus as Europe tries to reduce its dependence on Russian gas”

Plaquemines LNG will use the same modular construction approach as Calcasieu Pass. “Although Calcasieu Pass saw cost overruns of close to US$2Bn, if it had been a classic stick build, overruns could have been higher,” says Poten & Partners.

“At present, fewer EPC contractors want to provide lump-sum contracts because of commodity price inflation and escalating labour costs. More project developers are also expected to follow suit and take the modular approach because it reduces construction time. Speed to market is now in focus as Europe tries to reduce its dependence on Russian gas following its invasion of Ukraine.”

The EPC contractors for phase one of Plaquemines LNG are KBR and Zachry Group. Phase two will take the project to 20 mta. McDermott’s CB&I unit is building two 200,000 m³ storage tanks for phase one.

Plaquemines LNG could begin producing LNG by 2024.

Long-term contracts

While Venture Global has taken an uncommon approach to construction, it has followed a more traditional playbook on contractual arrangements. For the first phase of Plaquemines, it signed 20-year deals indexed to Henry Hub with investment-grade counterparties that include Poland’s PGNiG, China’s Sinopec and CNOOC, Shell, and France’s EDF. In June, Venture Global announced two long-term SPAs each with EnBW and Chevron. The Chevron SPA calls for the purchase of 1 mta from the Plaquemines LNG facility and 1 mta from the as-yet unbuilt CP2 LNG for 20 years. EnBW will purchase 0.75 MTPA from Plaquemines LNG and 0.75 mta from CP2 LNG for 20 years. 

“That’s the key to the credit. [Venture Global] took the approach of long-dated, highly-rated counterparties,” said one US banker, noting that this “helps significantly from a financing perspective”.