By Aaior K. Comfort

Shell has accused U.S.-based Venture Global LNG of allegedly wrongfully earning $3.5 billion by diverting liquefied natural gas (LNG) shipments to higher-priced spot markets, according to a report. The British oil major claims that Venture Global redirected gas shipments, breaching its long-term contracts with European customers following a spike in commodity prices after Russia’s invasion of Ukraine in February 2022.

This accusation comes in the wake of Shell’s arbitration case against Venture Global, a company that has been making waves in the global LNG market. Shell’s claim is supported by a study commissioned by the consultancy Compass Lexicon, which purportedly calculates the extra revenue Venture Global earned by allegedly denying contracted cargoes to certain European clients. Shell’s Chief Executive, Wael Sawan, criticized the breach, stating it violates the longstanding norms and sanctity of contracts that have governed the LNG industry for decades.

Ironically, Shell’s partner, Nigeria LNG (NLNG), faces similar allegations in a separate case. The London Arbitration Court and The High Court of Justice of England and Wales sanctioned NLNG for breaching an LNG supply contract. The court found that NLNG failed to deliver 19 cargoes of LNG, a contract executed in January 2020, which NLNG attributed to unprecedented improvements in LNG spot prices.

The case against NLNG was handled by an arbitration panel composed of John Beechey CBE, J William Rowley KC, and Nevil Phillips. Their judgment, issued on July 31, 2024, highlighted NLNG’s disregard for the terms and conditions of the contract, leading to significant legal and financial implications.

Venture Global, in response to Shell’s allegations, pointed to Shell’s own poor performance at its LNG facilities, further fueling the ongoing legal battle between the two energy giants.

These proceedings are being closely watched by the global LNG market, as their outcomes could have far-reaching implications on future financial ratings, legal standards, and contract enforcement within the industry. It remains uncertain whether NLNG will appeal the judgment issued by the High Court of Justice of England and Wales.