Exclusive-Shell challenges arbitration decision on Venture Global LNG supply contracts

By Francesca Landini and Stephanie Kelly

LONDON (Reuters) -Shell has challenged its defeat in an arbitration case against U.S. liquefied natural gas producer Venture Global in the New York Supreme Court, a legal filing seen by Reuters shows, weeks after rival BP won a similar $1 billion-plus arbitration.

Both arbitration cases were over Venture Global's failure to deliver liquefied natural gas under long-term contracts while selling on the spot market as prices soared after the outbreak of the war in Ukraine.

Shell, in its new filing, argued that while the legal hurdle to challenge arbitration decisions is high, it believed such an appeal was justified because Venture Global held back crucial evidence.

A Shell spokesperson confirmed the filing, which was dated Monday.

Venture Global said Shell had a full and fair arbitration process, which resulted in a unanimous decision against the oil company.

"Their court petition to vacate the award is without merit and is another desperate attempt to exert leverage to achieve a result they couldn’t secure contractually or in arbitration," a Venture Global spokesperson said in response to Reuters' request for comment.

"Venture Global will continue to deliver, build and sign new customers — helping to keep the global market well supplied with low-cost LNG. We will continue to focus on progress, not distraction, and will be responding appropriately," the spokesperson added.

Venture Global shares fell 5% in morning trade. The company has lost 67% of its value since it went public in January, according to data from financial firm LSEG.

Venture Global has enough cash to power through any arbitration decisions, CEO Mike Sabel told an earnings call on Monday.

CRUCIAL DOCUMENTS NOT DISCLOSED

Shell and other firms including BP, Edison and Galp filed arbitration claims starting in 2023.

They accused Venture Global of profiting from the sale of LNG on the spot market while not providing the firms with their cargoes agreed under long-term contracts from the Calcasieu Pass export facility in Louisiana.

Shell lost its case in August, while BP won its case in October. 

Shell now aims to overturn the arbitration decision in August, alleging that Venture Global failed to disclose crucial documents to explain why it had postponed the commercial start of operations beyond what Shell claims was the initial plan of 2022, the filing showed.

Shell claims a third party testified in arbitration that the U.S. LNG supplier had communicated to the third party its decision to postpone the commercial start of operations of its Calcasieu Pass plant "abruptly and inexplicably".

Shell claims it had requested the arbitrators to study communication between Venture Global and the third party but the U.S. LNG supplier "avoided disclosure through a series of misleading statements".

Venture Global argued that the Calcasieu Pass LNG plant was still in start-up mode and therefore not obliged to sell cargoes under long-term contracts, Reuters previously reported, citing a source.

The U.S. company argued that the plant only became fully operational in April this year once it was approved by regulators and lenders to do so, the same source said.

SHELL MENTIONS BP CASE IN FILING

Shell said in the new filing that Venture Global earned more than $20 billion from selling over 400 LNG cargoes on the spot market between 2022-25 before declaring commercial operations - and before starting deliveries to longer-term contract holders in April this year.

Shell referred to BP's win in the legal filing.

Reuters previously reported that BP won its arbitration case with an argument of unfair behaviour by the U.S. company, citing five sources close to the matter.

Combined claims from customers amounted to $5.5 billion, Venture Global said last January before it won the case against Shell, lost against BP and settled with China's Unipec.

"We are not able to comment further at this time, as the proceedings will be before the Court in due course and we remain bound by the confidentiality requirements of the contract and ICC (International Chamber of Commerce) arbitration rules," Shell said in an emailed statement.

(Reporting by Francesca Landini, Stephanie Kelly, Marwa Rashad, Shadia Nasralla, and Curtis Williams; Editing by Joe Bavier and Susan Fenton)