FILE PHOTO: Model of LNG tanker is seen in front of the U.S. flag in this illustration taken May 19, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
FILE PHOTO: The logo of British multinational oil and gas company BP is displayed at their booth during the LNG 2023 energy trade show in Vancouver, British Columbia, Canada, July 12, 2023. REUTERS/Chris Helgren/File Photo

By Vallari Srivastava

(Reuters) -Venture Global shares plunged about 20% on Friday after the U.S. LNG exporter lost an arbitration with BP over failure to deliver on a long-term gas supply contract, stoking worries of similar verdicts in pending disputes with other customers seeking billions of dollars in compensation.

The ruling in BP's favour came as a surprise after Venture Global's recent arbitration win against Shell.

BP is seeking more than $1 billion in damages plus interest and legal costs, with the final amount to be determined in a separate hearing in 2026.

Venture Global, the second-largest U.S. liquefied natural gas supplier, is facing other arbitration claims with customers seeking compensation of more than $4 billion linked to the delayed commercial start-up of the Calcasieu Pass project, according to the company's 2024 annual report.

The company previously warned that losing current or future arbitration cases could result in significant financial penalties, the termination of some gas supply contracts, and accelerated repayment of project debt.

All of the companies that have filed arbitration are seeking compensation, and none of them have sought to terminate their contracts in their proceedings, Venture has said.

It is unclear why the result of the BP arbitration was different to the Shell case, and whether this was due to differences in contracts or in the company's legal strategies.

Gabriel Moreen of Mizuho Securities called the ruling a "negative surprise," saying it introduces uncertainty for the remaining claims.

Friday's drop looked set to wipe out nearly $6 billion from the company's market valuation, if current losses hold. Since its January IPO, the shares have fallen more than 58%.

The stock declines also reflect ongoing investor caution over LNG commissioning risks.

Venture Global is expanding its production amid surging global demand, with the U.S. becoming the world's top LNG supplier in 2023.

CALCASIEU PROJECT IN SPOTLIGHT

In addition to BP and Shell, Italy's Edison, Portugal's Galp, Spain's Repsol, and Poland's Orlen have filed arbitration claims accusing the U.S. company of profiteering by selling LNG cargoes at higher spot market prices, rather than delivering them under long-term contracts.

Edison and Repsol told Reuters they were still pursuing their arbitration cases against Venture Global. Orlen declined to comment but said it remains in arbitration with the U.S. company.

Venture Global claimed that the Calcasieu Pass was still starting up, and had not reached the status of commercial operations. Long-term contracts do not take effect until the plant reaches commercial operations.

Citi said the result was "unexpected," adding that the tighter language in BP's contract likely contributed to the outcome.

The International Chamber of Commerce International Court of Arbitration found that it had breached its obligations to declare commercial operations had begun at the Calcasieu Pass plant in a timely manner and act as a "reasonable and prudent operator," Venture Global said on Thursday.

The company said it is evaluating all options and will continue to vigorously defend its position.

(Reporting by Vallari Srivastava in Bengaluru, additional reporting by Marwa Rashan in London, Francesca Landini in Milan and Marek Strzelecki in Warsaw; Editing by Sriraj Kalluvila)