Shell tables claims against Venture Global LNG over unsupplied cargoes as NLNG also faces arbitration hurdles

Shell Plc has filed complaints with US regulators against Venture Global LNG (VGL), the LNG exporter, for breach of contract to supply cargoes.

This follows VGL’s restriction of liquefied natural gas (LNG) supply to the global oil giant.

The Nigeria LNG Ltd (NLNG), meanwhile, is in a similar supply dispute and is currently in a UK high court to challenge an arbitral award demand order issued by an arbitration panel.

An industry source, who declined to be named, pointed to similarities between the disputes involving VGL and NLNG, attributing the challenge to the unexpected surge in the LNG market.

“The reason for this surge in disputes maybe related to the unexpected turn in losses to highly profitable margins, as high as $90 million per cargo, at the beginning of the Russia-Ukraine conflict, post-Covid market recovery and a huge demand in Asia and European markets, it is seen as a golden Era for LNG cargoes,” he said.

“This situation may have prompted numerous defaults on agreements, with major LNG suppliers opting to retain higher margins at the risk of lengthy litigations.”

Shell escalated its dispute with VGL after accusing the LNG producer of restricting supply access to it and other customers while on its own exporting over $18 billion of the super-chilled gas.

In a letter sent to the Federal Energy Regulatory Commission, Shell requested the commission to compel VGL to disclose plant commissioning data to clarify the cause of delayed commercial operations.

Shell and other European companies say they contracted with VGL but did not get their gas cargoes under long-term contracts, yet VGL has been selling gas from the plant for more than a year to others, costing its contracted customers billions in lost profit.

NLNG, in its own case, was held to be in breach of contract by failing to deliver 19 cargoes under a contract it executed in January 2020.

The cargoes, which were due for delivery between October 2020 and October 2021, have not been supplied.

In pleadings made by NLNG in its particulars of claims to the High Court of Justice in England and Wales Commercial Court, the breach was confirmed by a final arbitration award dated 30th January 2023.

NLNG Ltd is significantly owned by Shell, Total, and Eni, with the Nigerian federation controlling a 49 percent stake.