London Court Orders Nigeria LNG (NLNG) to Compensate Traders $380 Million Over Contract Breaches
In a significant legal ruling, a London court has mandated Nigeria LNG Limited (NLNG) to pay $380 million in damages to two prominent global commodity trading firms, Vitol and Glencore. The decision comes after a legal dispute arose from NLNG’s failure to deliver liquefied natural gas (LNG) shipments as stipulated in their contracts.
Reports from Reuters indicate that the legal proceedings centered around a supply agreement between NLNG and Taleveras, a trading company that was supposed to receive 19 LNG cargoes from NLNG during the years 2020 and 2021. Taleveras had contracted these shipments to Vitol and Glencore, but NLNG’s failure to fulfill its obligations led to a series of legal claims.
The case was adjudicated in London’s High Court and subsequently at the Court of Appeal, with the court rejecting NLNG’s appeal last week. As a result, NLNG is required to compensate Vitol $260 million and Glencore $120 million.
NLNG operates as a joint venture with Shell, TotalEnergies, and Eni holding minority shares, while Nigeria’s state-owned oil corporation maintains a 49% interest. NLNG declined to comment on the ruling when approached by Reuters, stating it was still assessing the judgment. Both Shell and Eni also opted not to provide comment, and TotalEnergies did not respond to inquiries regarding the case.
Founded by Nigerian entrepreneur Igho Sanomi in 2004 and currently based in Dubai, Taleveras did not comment on the judgment either. It remains unclear how much financial compensation Taleveras will receive from the $380 million payout owed to Vitol and Glencore. A full written ruling from the court is expected to be made available in the upcoming weeks.
This lawsuit reflects a broader trend in the energy sector, where sellers are facing increased litigation from buyers for not honoring contracts, particularly in the wake of market fluctuations following the COVID-19 pandemic.
In the wake of the pandemic, gas prices initially saw a dramatic drop, with European gas prices plummeting to 3.63 euros ($4.14) per megawatt-hour in 2020 due to diminished demand. However, prices surged to 311 euros ($328) per megawatt-hour in 2022 following Russia’s invasion of Ukraine, which disrupted supply chains. Some producers have faced accusations of reallocating contracted volumes to more profitable spot markets, neglecting long-term agreements. For instance, in another notable case, Shell and BP initiated legal proceedings against U.S. gas exporter Venture Global LNG for failing to deliver agreed shipments, with delays attributed to technical challenges at their facilities.
Additionally, NLNG is involved in another legal matter following a lawsuit filed by the Incorporated Trustees of the National Association of Plants Operators (NAPO). The suit concerns allegations regarding the Ministry of Labour’s purported refusal to register the trade union.
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