Stay knowledgeable with free updates
Simply signal as much as the Oil & Gas trade myFT Digest — delivered on to your inbox.
Shell and BP have requested Washington and Brussels to intervene in a bitter dispute with Venture Global LNG, warning the corporate’s refusal to honour a multibillion-dollar liquefied pure gasoline provide contracts threatens Europe’s power safety.
In correspondence seen by the Financial Times, the oil majors accuse the US LNG supplier of “misconduct” for withholding cargo agreed beneath long-term provide contracts and as a substitute promoting LNG on the spot market.
Shell alleges Venture Global’s “opportunistic” motion has enabled it to reap an $18bn windfall due to a spike in gasoline costs following Russia’s invasion of Ukraine whereas denting its skill to fulfill vital power provide wants in Europe.
The accusations have sparked a confrontation, with Venture Global branding as “outrageous” the businesses’ “request for interference” from the governments in binding contracts.
The supermajors, alongside Spain’s Repsol and Italy’s Edison, are amongst a number of basis prospects embroiled in contract arbitration with Venture Global. Foundation prospects agree long-term contracts that assist LNG suppliers appeal to financing to construct their tasks.
The European power teams are all in search of to power the US firm to ship the contracted cargo or pay monetary penalties beneath a course of that would take years.
The name for intervention from the joint EU-US Task Force on power safety — arrange after Russia’s invasion of Ukraine to spur US gasoline exports to Europe — marks a big escalation of the dispute. The physique is headed by senior officers, together with Ditte Juul Jørgensen, director-general for power on the European Commission, and Amos Hochstein, US President Joe Biden’s senior adviser on power.
Shell mentioned in a letter to the officers seen by the FT: “Such short-sighted, unprecedented conduct sets a concerning precedent that could erode market confidence and delay investment in the US LNG export infrastructure that is still critically needed to support Europe’s energy security.”
The letter authored by Steve Hill, govt vice-president of Shell Energy, and dated October 27 urges the duty power to press Venture Global to stop its “unjustifiable and damaging” actions and honour its long-term provide agreements.
A separate letter from BP concurred with Shell’s place. “Venture Global’s conduct has shaken confidence in the trustworthiness of American LNG suppliers at a critical time,” wrote Carol Howle, BP’s govt vice-president of buying and selling and delivery.
In its personal letter to the officers, dated November 10, Venture Global mentioned it was “honouring its contractual obligations to its long-term customers in strict conformity with its long-term contracts”.
“It is nothing more than the latest in a series of unsuccessful attempts to bully an industry newcomer into waiving its contractual rights in order to increase their own profits beyond recent record highs,” Mike Sabel, the corporate’s chief govt, and Bob Pender, co-chair, wrote.
Venture Global’s first LNG facility, Calcasieu Pass, situated on the Gulf coast in Louisiana, commenced producing LNG in January 2022 and exported its first cargo two months later. But the corporate argues it has not but began full business operations and isn’t obliged to produce basis prospects till the commissioning is accomplished.
It has declared “force majeure” on its contractual commitments on the grounds that the ability’s energy provide tools wants restore.
Shell mentioned the corporate’s excuse doesn’t face up to scrutiny, as the ability has delivered greater than 200 cargo shipments to prospects. The almost 600-day commissioning interval for Calcasieu Pass defies trade requirements, it added.
In its letter, it alleges Venture Global’s conduct “threatens to undermine the very objectives” of the duty power, which is to spice up Europe’s power safety. Venture Global retorted that as one of many few firms to efficiently finance, commercialise and construct capability it has been “integral” to the rise of US gasoline exports.
Edison has additionally written to the duty power requesting it “use all of its powers” to power Venture Global to produce the cargo. It accused the corporate of “profiteering” on the expense of European prospects.
Edison cites a report by Wood Mackenzie which forecast Venture Global stands to realize $17.5bn from the short-term market gross sales, in comparison with $2.8bn it will obtain beneath long-term contracts with basis prospects.
“This issue is no longer a private dispute between companies,” mentioned Edison in a letter seen by the FT. “Rather it is exacerbating an energy crisis affecting the lives of everyday European citizens. It can no longer be overlooked.”