Shell accuses Venture Global of ‘wrongfully earning’ $3.5bn | NLNG entangled in similar dispute

Shell says Venture Global wrongfully earned $3.5 billion by breaching an LNG supply contract, the Financial Times reports.

Shell LNG is a major shareholder of Nigeria LNG, which is involved in a similar dispute.

Incidentally, Shell’s partner, NLNG, was also sanctioned by a London arbitration tribunal and the high court of justice of England and Wales for a similar breach of an LNG supply contract.

NLNG is accused of failing to deliver contracted cargoes owing to unprecedented and historical improvement in LNG spot prices.

The British multinational is alleging that Venture Global LNG, the US gas giant, redirected gas shipments to higher-priced spot markets instead of keeping its long-term contracts with European customers.

Shell said Venture Global wrongfully earned $3.5 billion after delivering shipments to higher-priced spot markets following a commodities price spike after Russia invaded Ukraine in February 2022.

Venture Global LNG had earlier condemned Shell for its poor performance track record at its LNG facilities.

Industry watchers are drawing a parallel between Venture Global’s allegation with NLNG’s London arbitration and court cases, where it was found that it breached a contract for failing to deliver 19 cargoes of LNG, a contract it executed in January 2020.

The arbitration panel was made up of John Beechey, J William Rowley and Nevil Phillips.

NLNG is accused of  disregard for contract terms and conditions by NLNG, as recorded in judgement of the high court of justice of England and Wales issued against the Nigerian company on July 31, 2024.

The allegations by Shell against Venture Global are surfacing ahead of arbitration hearings Shell and several other energy companies have initiated against Venture Global, a newcomer that has disrupted the global LNG market, according to the Financial Times.

Shell’s claim was based on a study commissioned by Compass Lexicon consultancy, which aimed to determine the extra revenue Venture Global had seemingly wrongfully earned by denying certain European customers their contracted cargoes.

Wael Sawan, Shell’s chief executive, had said on the alleged Venture Global breach: “It is not in the spirit of what we have typically seen, nor is it the norm in LNG Business. The global LNG business has been built over the past 60, 70 years on the back of sanctity of contracts, on the back of really ensuring that suppliers and buyers live up to their part of the bargain.”

The global LNG market is focusing on these proceedings as it will surely have a fundamental impact on future financial and legal ratings as well as stringent contract provisions to enforce and respect the sanctity of contracts between LNG counterparts.

On the side of NLNG, it is not yet clear if it will proceed to the UK court of appeal to seek against the high court judgement.