Vitol and Glencore Win $380 Million in Nigerian LNG Dispute

Court ruling forces NLNG to compensate for undelivered cargoes

by Adedotun Oyeniyi
Nigerian LNG dispute

KEY POINTS


  • A London court has ruled that Vitol and Glencore will receive $380 million for undelivered LNG cargoes.
  • Nigeria’s LNG sector faces scrutiny over supply chain disruptions and contract disputes.
  • The ruling highlights the volatility of global LNG markets and risks to suppliers.

A long-standing legal battle between trading giants Vitol and Glencore and Nigeria’s sole liquefied natural gas (LNG) producer has resulted in a $380 million payout.

The dispute focused on the non-delivery of nineteen LNG shipments in 2020 and 2021.

Taleveras, the trading firm that had pre-sold these cargoes to Vitol and Glencore, initially sued Nigeria LNG Limited (NLNG), claiming breach of contract.

After multiple hearings in London’s High Court and Court of Appeal, NLNG’s appeal was rejected, clearing the way for Vitol to receive approximately $260 million and Glencore about $120 million in compensation.

Taleveras, founded by Nigerian energy trader Igho Sanomi and now based in Dubai, has remained tight-lipped on how much of the settlement it will ultimately receive.

Nigeria’s LNG sector faces supply chain challenges

NLNG, which operates the country’s largest LNG plant and accounts for about 5 percent of global supply, is under growing scrutiny over its supply reliability.

The case highlights a broader trend where producers, amid fluctuating gas prices, have opted to cut supply under long-term contracts in favor of higher profits on the spot market.

The global pandemic initially led natural gas prices to decline but they later soared when Russia’s invasion of Ukraine disrupted supply chains.

LNG producers such as Shell and BP encountered similar legal disputes over their inability to meet delivery obligations because technical issues emerged.

However, in the case of Taleveras versus NLNG, the exact reasons for non-delivery remain unclear.

Shell, Eni and TotalEnergies as well as minority stakeholders in NLNG chose not to provide comments about the court ruling but NLNG continues to assess the decision.

Impact on global gas markets and Nigeria’s LNG industry

Global LNG markets are currently experiencing unstable conditions when the ruling was announced.

According to Reuters, European benchmark gas prices have seen dramatic fluctuations, from as low as $4 per megawatt-hour in 2020 to peaks of $328 per MWh in 2022.

The legal decision against NLNG exposes producers to significant risks since they undertake contracts to meet rising Asian market demand.

Despite these challenges, Nigeria remains a key player in global LNG markets, though its industry continues to grapple with regulatory hurdles and infrastructure constraints.

The payout to Vitol and Glencore is one of the largest in recent LNG litigation and signals that traders will aggressively pursue legal action when suppliers fail to deliver.

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