Venture Global’s loss in a massive arbitration case with BP is a black eye for the wider U.S. LNG industry, whose breakneck growth looks set to contribute to a global supply glut and far more headaches for investors. The U.S. LNG producer, which has a $30 billion market cap, operates some of the largest U.S. LNG plants and was found to have breached its supply obligations to BP, according to a ruling on Thursday by the International Chamber of Commerce. The court determined that Venture Global failed to declare commercial operations had begun at its Calcasieu Pass plant in a timely manner and thus failed to act as a “reasonable and prudent operator.”
The firm shipped its first contractual cargo from the Calcasieu Pass facility in April, over three years after the plant started running in March 2022. Venture Global argued that the delay was due to the lengthy ramp-up of the plant. Supply contracts usually allow sellers a certain grace period between start-up and first delivery to smooth out operational issues. The three-year gap allowed Venture Global to reap massive profits as LNG spot prices soared after Russia’s invasion of Ukraine.
BP is seeking damages of more than $1 billion plus interest, costs, and attorneys’ fees. Venture Global in August won a similar arbitration case with Shell, and it remains unclear why the two processes had contrasting outcomes. It is still in arbitration processes with other buyers, including Spain’s Repsol, Portugal’s Galp Energia and Poland’s Orlen, which have accused Venture Global of profiteering.
The BP loss deals a significant blow to Venture Global. In its filing, the company said that losing other arbitration cases could lead to supply contract terminations and lenders requiring it to accelerate debt repayment.
Venture Global shares slumped 19% on Friday following the announcement of the result of the BP suit.
‘NOT ECONOMICALLY FULLY RATIONAL’
This case is, of course, specific to one company. But it comes as there are growing concerns about the financial viability of other LNG projects along the U.S. Gulf Coast that are either being built or in the planning stages. Shell CEO Wael Sawan last month told an event in New York that “the number of final investment decisions being taken surprises me, if I’m honest, because it’s at the higher end of the cost curve… So it’s not economically fully rational.”
“Therefore, we need to be able to then judge when is the right time to bring more capacity,” he added.
This could cool enthusiasm among banks and investors backing LNG projects, as well as companies signing supply contracts with new facilities.
SUPPLY GLUT
The huge volume of LNG that is projected to flood the market over the next few years is expected to far exceed demand growth, according to analysts.
This, in turn, will likely lead to lower global LNG prices and possible capacity shutdowns, particularly in the United States, where production costs are higher than in other countries such as Qatar.
Between 2025 and 2030, a total of more than 300 billion cubic metres per year of new LNG export capacity is expected to come online, half of it in the United States, marking the largest wave of additions in any comparable historical period, according to the International Energy Agency. That figure excludes Russia’s 27 bcm Arctic LNG 2 project, which has started exporting significant volumes to China in recent weeks even though it still faces heavy U.S. sanctions.
Current global LNG production stands at around 550 bcm. Venture Global’s production is set to rise to 93 bcm in 2027 from 54 bcm today through its Calcasieu Pass and Plaquemines facilities, as well as its CP2 project, which is expected to be online in 2027, making it the top U.S. LNG export company. Venture Global’s arbitration drama has shaken the U.S. LNG industry’s reputation as a reliable source of supply at a time when President Donald Trump’s administration seeks to use the industry as an important tool in its global trade wars.
The court cases therefore, further cloud the sector, which already faces a glut.
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<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Looming LNG glut The growing share of LNG
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Ron Bousso Editing by Rod Nickel)