By Nidhi Verma
NEW DELHI (Reuters) -Gazprom Singapore has failed to deliver some liquefied natural gas (LNG) cargoes to Indian state firm GAIL Ltd and has said it may not be able to meet supplies under their long-term deal, three sources familiar with the matter said.
The sources did not say why Gazprom Marketing and Trading Singapore (GMTS) did not deliver the supplies. Global competition for the super-chilled fuel and low inventories have sent Asian LNG prices soaring.
GMTS is a subsidiary of Gazprom Germania, a former unit of Russian energy giant Gazprom, now under the control of Germany’s network regulator.
“We are facing difficulties, (the) situation is quite tight as GMTS has already defaulted on some cargoes and they have said they may not be able to meet commitments under the contract,” said one of the sources. They declined to be named because they were not authorised to speak to the media.
Reuters reported on Monday that Gazprom had told customers in Europe that it couldn’t guarantee gas supplies due to ‘extraordinary’ circumstances. According to a letter dated July 14, Gazprom declared ‘force majeure’ on supplies, meaning it did not have to meet its contractual obligations.
GMTS is willing to offer a penalty to the Indian company for missed cargoes. One of the sources said the penalty is miniscule compared to spot prices of LNG.
“GMTS’ LNG portfolio has been restricted as a result of the Russian sanctions,” Germany’s network regulator said in an e-mailed statement.
“GMTS is therefore using the mechanisms existing in its contractual agreements to manage the situation with its customers,” it added, not providing further details.
GAIL, GMTS, Gazprom and Gazprom Germania did not respond to Reuters requests for comment.
GAIL, which imports and distributes gas and also operates India’s largest gas pipeline network, agreed in 2012 a 20-year deal with Russia’s Gazprom for annual purchases of an average 2.5 million tonnes of LNG. Supplies under the contract began in 2018.
GMTS had signed the deal on behalf of Gazprom. At the time, Gazprom Germania was a unit of the Russian state firm.
However, following Western sanctions against Russia over its invasion of Ukraine, Gazprom gave up ownership of Gazprom Germania in early April without explanation and placed parts of it under Russian sanctions.
Considered key for Germany’s energy security, the company is now controlled by German regulator Bundesnetzagentur (BNetzA).
Bundesnetzagentur had no immediate comment.
Responsibility to meet the supply commitment lies with Gazprom, which had asked GAIL to sign the deal with the Singapore-based entity, said the sources, adding the Indian company was in talks with the Russian gas firm.
“We are looking into the commercial aspects of the (GAIL) deal and working out some alternative arrangements including spot purchases,” a second source said.
Sources said GAIL may have to step up spot purchases of LNG at higher prices to meet local demand.
Earlier this month, GAIL bought a spot LNG cargo at $38 per million British thermal units (mmBtu) for August loading, two sources said.
GAIL was getting the gas under the deal with Gazprom at about $12-$14 per million British thermal units (mmBtu).
(Reportng by Nidhi Verma, additional reporting by Christoph Steitz in Frankfurt; Editing by Emelia Sithole-Matarise, Alexandra Hudson)
