Venture Global LNG has strongly criticized Shell for its poor performance record at its LNG facilities, intensifying a dispute between European LNG buyers and the U.S.-based company.
The conflict involves Shell, BP, Repsol, Galp, and other European LNG buyers, and centers on the definition of commissioning cargoes from a new LNG facility, which has significant implications for financing and future LNG sales.
According to a report by Riviera Maritime Media, European buyers allege that Venture Global LNG denied them cargoes from its Calcasieu Pass facilities, resulting in billions of dollars in lost profits.
The buyers had entered into a binding 20-year sale and purchase agreement with the terminal, covering 8 million tons per annum (mtpa) of the terminal’s total planned 10 mtpa offtake.
In 2019, the agreed pricing was around $2 per million British thermal units (mmBTU). By August 2023, spot prices for LNG surged to $89 per mmBTU, leading to a profit margin exceeding $100 million per LNG cargo.
Venture Global saw this as an opportunity to sell cargoes at prices much higher than the long-term agreements, arguing that providing cargoes to Shell, Galp, Edison, and others would have benefited the spot market rather than Calcasieu Pass.
The dispute escalated when Shell, BP, and others wrote to the EU-US Task Force on Energy Security, requesting intervention and accusing Venture Global of “opportunistic” actions.
In response, Venture Global sent a letter to the Task Force, highlighting Shell’s past actions of buying and trading commission LNG cargoes for profit outside of Europe.
They also criticized Shell’s “abysmal record of failed execution at its own LNG facilities where they are a major shareholder or construction leader.”
Venture Global described the dispute as “the latest in a series of unsuccessful attempts to bully an industry newcomer into waiving contractual rights to increase their own profits beyond recent record highs.”
The company positions itself as a long-term, low-cost provider of US LNG from resource-rich North American natural gas basins.
Shell LNG, a global player and major shareholder in Nigeria LNG, recently faced a London arbitration panel ruling that found Nigeria LNG in breach of contract for failing to deliver 19 cargoes of LNG under a contract executed in January 2020.
This arbitration panel included John Beechey CBE, J William Rowley KC, and Nevil Phillips. The breach alleged by Venture Global against Shell and others is reportedly similar to the Nigeria LNG breach.
The enforceability of the arbitration award is being challenged by Nigeria LNG in the UK High Courts. Additionally, Shell and others have filed separate arbitration cases against Venture Global LNG at the London Court of Arbitration.
SOURCE:https://africa.businessinsider.com
