- Oil and gas giant Exxon Mobil is suing Australia’s Macquarie Energy to avoid paying US$11.7 million (around A$15.2 million) in damages for missed deliveries
- Exxon will ask the Texas court to rule that February’s severe weather was a natural disaster
- Such a ruling would release Exxon from its obligations under its Macquarie contact, meaning it will no longer need to cover Macquarie’s $15 million in damages for missed delivers
- While Macquarie has rejected Exxon’s own declaration of natural disaster, it has allegedly declared its own forced Majeure event for gas it had agreed to provide Exxon in Texas
- The deep freeze sent gas prices soaring, with Macquarie coming out as one of the key winners from the sky-high prices
- According to a Reuters report, Macquarie could pocket around US$317 million (around A$412 million) in profit from the weather-related gas binge
Oil and gas giant Exxon Mobil is suing Australia’s Macquarie Energy to avoid paying US$11.7 million (around A$15.2 million) in damages for missed deliveries.
The two energy companies will face the Texas court as Exxon seeks a ruling that last month’s deep freeze was a natural disaster.
Essentially, Exxon’s natural gas business is arguing that the massive storm and severe weather conditions, combined with Texas state declarations of emergency, prevented it from fulfilling supply commitments to Macquarie.
Macquarie Energy is the second-biggest United States gas marketer.
If the court rules the storm was a natural disaster, Exxon will be released from the obligations under the contract with Macquarie, meaning it will no longer need to cover the wholesaler’s $15 million in damages for missed deliveries.
Macquarie has rejected Exxon’s declaration of natural disaster, but allegedly issued its own forced Majeure declaration over gas it had agreed to provide Exxon in Texas.
Forced Majeure events refer to unforeseen and unavoidable circumstances hindering a company or person from fulfilling obligations under a contract.
The severe storm
February’s deep freeze saw wild weather freezing over power generation systems in Texas and knocking our power grid equipment, leaving millions of homes across the state without power.
The power outage sent real-time wholesale market prices on Texas’ power grid skyrocketing from around $60 per megawatt-hour to over $11,500 per megawatt-hour.
This meant Texas residents who had variable-rate contracts were hit with shocking electricity bills if they managed to keep the power on during the storm. Some Texas residents reported power bills upwards of $21,000 for the week Texas’ power grid was frozen over.
However, it seems Macquarie was one of the key beneficiaries of the sky-high electricity prices.
According to a Reuters report, Macquarie Energy could collect a nifty US$317 million (around A$412 million) in profit from the weather-related gas binge. This is on top of any payment it receives from Exxon for failed deliveries under the two parties’ agreement.
An Exxon spokesperson said the company is confident it has complied with all obligations under the Macquarie contract.