Shell appeals against arbitration ruling on Venture Global LNG Supply Contracts

Shell has filed a lawsuit in New York Supreme Court to challenge its loss in an arbitration against U.S. liquefied gas producer Venture Global. This comes weeks after BP won a $1 billion arbitration.

The two arbitration cases were based on Venture Global's inability to deliver LNG as per long-term contracts, while the prices of LNG soared following the outbreak of war in Ukraine.

Shell argues in its latest filing that, while it is difficult to appeal arbitration decisions, they believe such a move was justified as Venture Global withheld crucial evidence.

Shell confirmed that the document was filed on Monday.

Venture Global claimed that Shell conducted a fair and full arbitration process which led to a unanimous ruling against the oil firm.

Venture Global's spokesperson responded to a request for comment by saying that the court's petition to annul the award was without merit. It is another desperate effort to exert pressure to get a result which they could not achieve contractually or through arbitration.

"Venture Global continues to build, deliver and sign new clients -- helping to ensure that the global market is well-supplied with low-cost gas. "We will focus on progress and not distractions, and will respond appropriately," said the spokesperson.

Venture Global's shares plunged on the news. They fell 11.3%, to a price that is close to their all-time lowest of $7.48 in April 2024.

Since the company went public in January last year, its value has dropped by nearly 70%. Mike Sabel, CEO of Venture Global, said in a Monday earnings call that the company has enough cash to survive any arbitral decisions. Mike Sabel said that the company had enough cash and projects to continue growth.

CRUCIAL DOCUMENTS NOT DISCLOSED Shell, BP, Edison and Galp among others filed arbitration claims in 2023.

Venture Global was accused of profiting off the sale of LNG at the spot market, while failing to deliver the cargoes that were agreed upon under long-term contracts with the Calcasieu Pass Export Facility in Louisiana. Shell lost in August while BP won in October.

Shell is now seeking to reverse the arbitration decision of August, claiming that Venture Global had failed to provide crucial documents explaining why it delayed the commercial start-up of operations beyond 2022. Shell claimed this was their initial plan.

Shell says a third-party testified at arbitration that U.S. supplier of LNG had "abruptly" and "inexplicably" informed the third-party of the decision to delay the commercial launch of Calcasieu Pass's plant.

Shell says it asked the arbitrators for a study of the communication between Venture Global, LLC and a third party. However, the U.S. supplier of LNG "avoided disclosing through a series misleading statements".

Agnieszka Ason, of the Oxford Institute for Energy Studies said that an undisclosed exchange with a third-party could raise serious concerns about the reliability and the integrity of witness testimony. She added that the petition did not reopen a case on its merits but asked the court to annul the arbitration award 'on narrow, mostly procedural grounds.

She said that, "while a post award challenge may appear paradoxical, since arbitration is meant to avoid court involvement," it was a normal course of action by a losing party who wanted to overturn an unfavourable result.

Venture Global, citing an anonymous source, claimed that Calcasieu Pass was still in startup mode and not required to sell cargoes on long-term contracts.

Sources said that the U.S. firm claimed the plant was only fully operational by April of this year, after it had been approved by regulators.

SHELL MENTIONS BP CAS IN FILING

Shell stated in the new filing, Venture Global made more than $20 billion by selling 400 LNG cargoes between 2022 and 25 before declaring commercial operation - and starting deliveries to long-term contract holders this April.

Shell referred in its legal filing to BP’s victory.

BP's arbitration case was won by BP, according to a previous report citing sources familiar with the issue. Venture Global reported in January that the total claims of customers amounted $5.5 billion. This was before they won against Shell, lost to BP, and settled with China Unipec.

Shell stated in an emailed message that it was unable to comment at this time as the court proceedings would be held in due course. We are also bound by confidentiality provisions of the contract, and the ICC (International Chamber of Commerce), arbitration rules. Shell said in an emailed statement that it was unable to comment further at this time, as the proceedings will be before the Court in due course and we remain bound by confidentiality requirements of both contract and ICC (International Chamber of Commerce) arbitration rules.

(source: Reuters)