Shell and BP accuse LNG supplier of reneging on contracts

Top LNG traders Shell and BP have separately filed for arbitration against US exporter Venture Global LNG for failing to supply contracted cargoes, even as it sold to noncontract customers as prices soared, four people familiar with the matter said.

A Venture Global spokesperson didn’t comment on the Shell and BP claims. In June, the company said it was in full compliance with terms of its long-term contracts and said its modular facility needed extensive commissioning.

Shell and BP missed out on billions of dollars in sales that went to Venture Global because they were unable to get their contracted fuel, one of the people familiar with the arbitration filings said. Prices for liquefied natural gas (LNG) soared in 2022 when Russia cut gas supplies to Europe in retaliation for sanctions after invading Ukraine.

The companies filed their cases at the London Court of International Arbitration. A similar case was brought by Italian utility Edison in May. Another Venture Global contract customer, Spanish energy firm Repsol, has asked US regulators to release confidential records that would shed light on the plant’s start-up.

Shell and BP declined to comment.

Founded by a former energy lawyer and investment banker, Venture Global has emerged as a market force with its ability to obtain financing and rapidly build export plants. It has pledged to produce 70-million tonnes of LNG a year once the projects are completed.

The contracts were tied to Calcasieu Pass LNG, the first of Venture Global’s three planned facilities. It stitched together 18 liquefaction units to produce as much as 12-million tonnes a year of the supercooled gas.

However, the plant’s on-site power supply facility required extensive repairs that will prevent contract deliveries from the first phase until early 2024, Venture Global has said.

Still, the facility has shipped six pre-commercial LNG cargoes so far this month, and 166 since its exports began in March 2022, Refinitiv vessel tracking data shows.

“The whole point in signing a contract is there is certainty you’re going to have this supply and, in this case, that certainly hasn’t emerged,” said Ira Joseph, an LNG expert and fellow at Columbia University’s Center on Global Energy Policy.

The dispute will cause buyers to strictly define commissioning in future purchase and sales agreements, he said.

The contracted customers believe they lost enormous profits as LNG prices in Europe jumped last August to a peak of $89 per million British thermal units (mmBtu), from about $6 to $10 per mmBtu in 2018. Prices earlier this month were about $11 per mmBtu.

Reuters