Exclusive-How BP won its $1 billion-plus case against Venture Global

By Stephanie Kelly, Marwa Rashad, Curtis Williams and Francesca Landini

LONDON (Reuters) -Oil major BP won its $1 billion-plus arbitration case against liquefied natural gas producer Venture Global with an argument of unfair behaviour by the U.S. company, said five sources close to the matter, shedding light on strategy that could be used by claimants in parallel cases.

BP won its case in October, two months after rival Shell lost a similar case when it failed to prove that Venture Global broke its long-term LNG contracts. Shell did not push the argument of unfair behaviour in its arbitration, the sources said.

Lawyers across the industry have been chasing details of BP's winning strategy as four other companies seek billions of dollars from Venture Global, legal and industry experts said.

Unlike legal cases, arbitration awards are not precedent-setting, said Roberto Lipari, Europe's head of litigation and dispute resolution at law firm Dentons, meaning that similar cases can have very different outcomes depending on how counsel presents the facts and how arbitrators interpret them.

ONE OF THE BIGGEST DISPUTES IN THE INDUSTRY'S HISTORY

Shell, BP, Unipec, Edison, Galp, Repsol and Orlen all took Venture Global to arbitration in one of the biggest disputes in the history of the LNG industry.

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.

BP was seeking damages of more than $1 billion, but a new hearing was required to determine the amount, Venture Global said after losing the case. Venture Global said in October that it believed that the BP ruling contradicted findings of the Shell arbitration. 

BP has not publicly disclosed how much it is seeking in damages from Venture Global, BP Chief Executive Murray Auchincloss said in a call with analysts on Tuesday. A date has yet to be set to determine damages, he added.

"The (BP arbitration) outcome underscores the growing legal exposure facing Venture Global as multiple ... disputes worth billions of dollars unfold in parallel," said Agnieszka Ason of the Oxford Institute for Energy Studies, a research institute.

The companies say that Venture Global withheld LNG cargoes that should have been delivered under long-term contracts. 

RUSSIAN INVASION BOOSTED DEMAND FOR U.S. LNG

Venture Global made billions of dollars more by selling more than 400 LNG cargoes on the spot market between 2022-2025 as the loss of Russian gas supplies after Russia's invasion of Ukraine sent traders and industries in search of U.S. LNG.

Venture Global argued that its Calcasieu Pass LNG plant in Louisiana was still in start-up mode and therefore not obliged to sell cargoes under long-term contracts, said another source with knowledge of the matter. 

Venture Global 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. The company argued that long-term customers had been aware it would sell gas on the spot market during the ramping up of production and that it offered them cargoes back in 2021, the source added.

BP, Shell, Galp, Edison and Orlen declined to comment for this story. Repsol said that arbitration was ongoing. 

Unipec has settled its case, Reuters reported previously, citing two sources.  

Shell and BP's hearings took place in New York under the rules of the International Court of Arbitration under the umbrella of the Paris-based International Chamber of Commerce.

The BP tribunal concluded that Venture Global had not acted as a reasonable and prudent operator and breached its obligations to declare the start of commercial operations in a timely manner, Venture Global said after losing the case.

Under tribunal rules, details of the Shell and BP hearings remain confidential unless challenged in court.

Venture Global has said the Calcasieu Pass project design differs from the rest of the industry in that the plant has 18 trains versus an industry average of 2-3 trains, which means that initial production starts more quickly but full operation takes longer to ramp up.

(Reporting by Stephanie Kelly, Marwa Rashad, Dmitry Zhdannikov, Shadia Nasralla, Francesca Landini and Curtis WilliamsAdditional reporting by America HernandezEditing by David Goodman)