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Shell is alleging US liquefied natural gas provider Venture Global “wrongfully earned” $3.5bn by failing to deliver shipments to European customers under long-term supply contracts and instead sold them on high-priced spot markets when gas prices soared following Russia’s full-scale invasion of Ukraine.
The accusations are emerging ahead of arbitration proceedings Shell and several other energy companies have filed with Venture Global, a new entrant which has shaken up the global LNG market. They are the latest salvo in an unusually bitter fight between some of the largest players in the LNG industry.
Shell based the claim on a study it commissioned from consultancy Compass Lexicon “to assess how much more revenue Venture Global wrongfully earned by denying certain European customers their contracted cargoes”.
Separate to the study, Shell alleges Venture Global caused “extraordinary difficulties” for one buyer, which scrambled to source LNG from at least five rival US facilities at additional costs of about $1.5bn between October 2022 and May 2024 to meet demand. Polish energy company Orlen is identified as the customer with the largest exposure by the Compass Lexicon report.
Orlen declined to comment on Compass Lexicon’s report.
Italy’s Edison, Spain’s Repsol and Portugal’s Galp were also affected by Venture Global’s actions, according to the study. These companies, together with Orlen, are so-called foundation customers of Venture Global, which struck long-term contracts that helped the LNG provider attract financing to build its projects. They are all in arbitration proceedings with Venture Global.
If Venture Global continues to sell at spot prices, the extra cost to these European customers would rise to $4.65bn to source replacement gas from other providers, according to Shell’s estimate.
“Consumers and taxpayers throughout Europe bore these excess costs while Venture Global benefited,” Shell alleges in a briefing document prepared for the arbitration.
Venture Global’s first LNG facility, Calcasieu Pass, located on the Gulf coast in Louisiana, started producing LNG in January 2022 and exported its first shipment two months later.
The company maintains it has not yet started full commercial operations and is not obliged to supply foundation customers with LNG until the commissioning is completed. It has declared force majeure on its contractual commitments on the grounds that the facility’s power supply equipment needs repair.
A Venture Global spokeswoman dismissed the consultancy report as “paid propaganda”.
“Due to our ability to produce first LNG during construction we have been uniquely positioned to bring more incremental molecules into the market which lowers prices, not raises them,” the spokeswoman said. “Venture Global is honouring its contractual obligations to its long-term customers in strict conformity with its long-term contracts.”
Venture Global, which was founded by ex-banker Michael Sabel and lawyer Robert Pender, has shaken up the global LNG industry by expanding rapidly, in the process becoming embroiled in a bitter public dispute with industry heavyweights Shell and BP. If it completes its Plaquemines and CP2 projects, also in Louisiana, it will have an export capacity of more than 65mn tonnes of gas a year, second only to Qatar.
The Shell study and a related briefing note, which have been seen by the Financial Times, do not detail the extra costs to Shell and BP, which are also foundation customers of Venture Global. Analysts said both supermajors may have paid billions of dollars more for gas on spot markets to make up for the contracted cargos that were not delivered by the group.
Kjell Eikland, managing director of Oslo-based consultancy Eikland Energy, said Shell, BP and Edison’s role as lead parties in the Venture Global arbitration indirectly shows which companies suffered the biggest losses. The “value steal” by Venture Global was “inarguable” and represented a “radical break of industry good-faith traditions” in terms of contracting with foundation customers, he said.
Shell claims the Venture Global facility has sold more than 330 shipments to spot market buyers over a 908-day commissioning period and reached its full capacity of 10mn tonnes a year in October 2022.
A Shell spokesman said the consultancy report might be a useful tool to policymakers and regulators as they consider what to do about the “magnitude of Venture Global’s extraordinary behaviour”. Shell has sought the support of US and EU energy authorities in the conflict, to no avail thus far.
“Venture Global likes to portray that it is generously supplying LNG to European citizens most impacted by Russia’s invasion of Ukraine,” said a Shell spokesman. “What they’ve failed to disclose is how they’ve banked billions in additional profits on the backs of those customers — all while denying foundational buyers the cargoes they were contractually promised. That’s not generosity, it’s greed.”