Nigeria LNG Ordered to Pay $380m in Compensation to Vitol, Glencore After London Court Ruling
A London court ordered in Nigeria LNG (NLNG) to pay $ 380 million in compensation to world raw materials Vitol and Glencore after having ruled in favor of the two companies in a legal battle on unattended contracts with liquefied natural gas (GNL).
According to a Reuters report citing legal documents, the decision stems from non-compliance with the NLNG from delivering contracted LNG cargoes, a violation which sparked a series of prosecution which culminated in the recent verdict.
The dispute returns to a supply contract between NLNG and Taleveras, an international commercial company founded by the Nigerian businessman Igho Sanomi. Under the agreement, NLNG was supposed to provide Taleveras with 19 LNG cargoes between 2020 and 2021. However, the Nigerian gas company did not comply with its obligations.
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Taleveras, who had already pre-sold some of these expeditions to Vitol and Glencore, was then continued by the two world merchants. This trial launched a chain of legal action, which ultimately led to the NLNG responsible for non-delivery.
After examining the case, the High Court of London and the Court of Appeal ruled against NLNG, ordering the company to pay around $ 260 million in Vitol and $ 120 million in Glencore.
The London Court of Appeal last week rejected the NLNG appeal, confirming the previous decision and confirming compensation of $ 380 million.
The NLNG, a joint venture involving the Public Public Company (NNPC) of Nigeria (49%) and the minority stakeholders (25.6%), the totals (15%) and ENI (10.4%), did not officially respond to the decision.
When he was contacted by Reuters, Nlng refused to comment, declaring that he was still examining the judgment.
Meanwhile, Shell and Eni refused to comment, while Totalengies did not respond to requests for information concerning the case.
Taleveras, now based in Dubai, also refused to comment on the decision. It is not clear if the company itself will receive financial compensation beyond 380 million dollars due to Vitol and Glencore. A full written judgment should be published in the coming weeks.
LNG market display up after
The decision against NLNG is part of a broader trend in legal disputes in the world LNG market, where buyers have continued producers for having omitted to conclude supply agreements.
The energy market experienced significant volatility during the Pandemic COVID-19 and after the invasion of Ukraine by Russia in 2022. During the pandemic, gas prices dropped to $ 4.14 per megawatt (MWh) due to low demand. However, after the invasion of Ukraine by Russia, European gas prices increased to $ 328 per MWh, causing chaos in supply chains.
In the midst of this price increase, several LNG suppliers were accused of having diverted contractual cargo on the cash market, where prices were much higher, instead of honoring long -term contracts.
For example, Shell and BP continued US LNG Export Venture Global GNL, alleging that the company did not provide contractual volumes when selling the cash market. Global Venture, however, blamed the problem of technical challenges in its facilities.
Implications for the NLNG and Nigeria gas sector
The decision against NLNG – The only exporter of Nigeria LNG – deals with concerns concerning the reliability of contracts in the country’s gas sector. The judgment could also have an impact on the confidence of investors, because Nigeria seeks to extend its gas exports in the middle of increasing competition from other LNG producing countries.
The verdict comes at a time when the Nigerian government is pressure for increased production and exports of gas in the context of its broader economic strategy under President Bola Tinubu. The government has also hired international oil companies (CIO) to attract new investments in the country’s energy sector.
The London Court of Appeal rejecting the Appeal of NLNG, the company could now end up with limited legal options to challenge the decision. An official response from NLNG is still expected, and the expected full written judgment could give more clarity on the broader implications of the case.
