Gail eyes legal action on Gazprom LNG supply cuts

Indian state-controlled gas distributor Gail will take legal action against Russian state-controlled firm Gazprom following losses incurred last year because of supply disruptions, Gail chairman Sandeep Kumar Gupta said on 19 May.

Gail has initiated arbitration in a London court as Gazprom's subsidiary SEFE Securing Energy for Europe failed to supply contracted LNG volumes to the Indian company from June 2022-February 2023. "They had alleged force majeure which we did not accept, considering it was a portfolio contract and they should have supplied it from other geographies when there was an issue with Russian gas," he said.

The disruption in supplies from SEFE came after the German government acquired the latter firm after the start of the Ukraine war in February and prohibited it from taking volumes from Russia, Gupta added.

Gail is set to receive four LNG cargoes in May and June from SEFE, a senior company official told Argus. Each cargo will have a volume of 85mn m³ and is priced at $13/mn Btu, the official said. Gail expects supplies from SEFE to continue over the coming months, he added.

The company had received [four cargoes over March-April] (https://direct.argusmedia.com/newsandanalysis/article/2433699), when supplies resumed.

These supplies are part of 20-year term LNG deals that Gail signed with Gazprom subsidiary Gazprom Marketing and Trading in Singapore (GMTS) in 2012 for an average of 2.5mn t/yr of LNG. GMTS then was a unit of Gazprom Germania, which in June 2022 began operations as SEFE Securing Energy for Europe.

Gail expects India's gas demand to rise this year and also has been looking at more long-term contracts with the UAE and Qatar.

The disruption in Gazprom supplies led to Gail imposing regulations on supply of regasified LNG to downstream customers from mid-July 2022 to mid-March 2023, junior oil minister Rameshwar Teli said in parliament in March.

Gail's overall natural gas transmission volumes rose to 108.23mn m³/d during January-March 2023, from 107.56mn m³/d a year earlier, despite the supply disruptions from SEFE.

Gas marketing volumes were at 96.46mn m³/d during January-March, up slightly from 94.69mn m³/d a year earlier.

By Rituparna Ghosh and Akansha Victor