KEY POINTS
- Shell’s Steve Hill accused Venture Global of breaking long-term LNG contracts.
- Shell, BP, and other companies have filed arbitration cases, seeking compensation for missed shipments.
- Venture Global expected full commercial operations by early 2024, but ongoing issues at its Calcasieu Pass plant have created uncertainty.
Shell, a leading energy company, has claimed that Venture Global, a U.S. liquefied natural gas producer, has acted unfairly in breaching long-term LNG contracts. During the Gastech conference held in Singapore, Shell’s Executive Vice President, Steve Hill, tagged the actions being perpetrated by Venture Global as detrimental to the industry.
The main concern surrounds the fact that the LNG industry relies heavily on such contracts to facilitate project financing and structure. Hill pointed out that the above action might have long-term effects on the stability of the industry’s contracts. ”The LNG business is based on long-term relationships and contracts,” Hill stressed.
While the Louisiana company, Venture Global, has cited the breakdown of machinery for its problems, some continue to assert that it is little more than an alibi for the company. Venture has maintained over 190 cargoes to customers who do not enter into long-term agreements, making several stakeholders argue that the company is focusing on short-term returns.
Major companies go to court
Shell and BP have gone to the London commercial court while other firms such as Italy’s Edison or Spain’s Repsol have also voiced their concern.
Venture Global first began gas processing at its Calcasieu Pass facility in Louisiana in March 2022. This plant is the company’s first of three planned LNG facilities and is capable of producing up to 12 million metric tons of LNG annually. According to Reuters, the company had delivered at least 177 cargoes worth $15.3 billion through May 2023. However, despite the success of these shipments, contract customers like Shell and BP have been left empty-handed, prompting them to seek arbitration to recover potential losses.
Venture Global’s opinion on the breached LNG contracts
Venture Global countered it, stating that the shipments sent out so far were “pre-commission cargoes,” implying that they were not part of the agreement. These delays have been attributed to equipment problems by the company; however, most of the contracted buyers have not been appeased by this excuse. Although, Venture Global had stated in a FERC filing back in April that full commercial operations would commence by early 2024.
LNG contracts: Industry impact and emerging issues
In response to the allegations, Venture Global has not offered detailed explanations beyond equipment issues. The company remains focused on getting its operations fully running. While this might resolve some concerns, it’s clear that the trust between Venture Global and its contract customers has been seriously damaged.
Will buyers now hesitate before entering long-term agreements with new suppliers? Could these disputes lead to tighter regulations in the LNG industry, or even alter how contracts are structured in the future? These are some of the emerging key concerns.
