Russian gas giant Gazprom resumes regular LNG supplies to India’s GAIL I Why it is crucial for India?

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Nearly a year after Russian gas supplier giant Gazprom halted supplies to India due to the ongoing war, it has resumed supplying Liquefied Natural Gas (LNG) to Indian state gas utility GAIL. According to GAIL chairman Sandeep Kumar Gupta, the resumption of supplies, which came to a halt in June last year, has shored up gas availability in the country.

Separately, six US companies have offered GAIL a stake in their liquefied natural gas export facility. Sefe Marketing and Trading Singapore Pte Ltd (SMTS), erstwhile Gazprom Marketing and Trading Singapore Pte Ltd supplied two liquefied natural gas (LNG) cargoes each in March and April and has committed 4 shiploads each in May and June, Gupta said. “Hopefully, similar volumes will be renominated for future months also,” he said.

Sefe will decide on volumes on a month-to-month basis. GAIL had in 2012 signed a 20-year deal with Gazprom Marketing and Singapore (GMTS) to buy 2.85 million tonnes per annum of LNG. Supplies started in 2018 and the full volume was to reach in 2023.

West sanctions

GMTS had signed the deal on behalf of Gazprom. GMTS was moved to Gazprom Germania, now called Sefe. But in early April last year, Gazprom gave up the ownership of the German unit without giving a reason and placed parts of it under Russian sanctions.

This followed the West slapping sanctions on Russia for its February 24 invasion of Ukraine. It invoked force majeure and stopped supplies to India from June 2022. Gupta said normal supplies have resumed and hope they will continue.

On the expression of interest GAIL had released in February this year to buy up to 26 per cent stake in a US LNG export facility in an attempt to shore up supplies to meet rising demand in India, he said half a dozen interests have been received. “We are in the process of second stage shortlisting,” he said without giving details.

The company in February released an expression of interest to acquire as much as 26 per cent equity in an existing LNG plant or a proposed facility that will be commissioned by 2027. It was also interested in sourcing 1 million tonnes a year of LNG from the facility for 15 years from 2026. The contract could be extended by another 5 to 10 years. Liquefaction plants convert natural gas into liquid form, enabling its seaborne transportation.

GAIL (India) Ltd had run into supply disruptions last year after Russia-owned Gazprom Marketing and Trading (GMTS) failed to deliver contracted LNG due to Western sanctions on Moscow over its invasion of Ukraine.

To make up for the shortfall, GAIL cut supplies to some customers, including its own petrochemical plant and bought LNG from the spot or current market.

It is also in discussions with Abu Dhabi National Oil Co and Russia’s Novatek PJSC for long-term LNG deals. Sefe, formerly GMTS, “in its annual delivery plan and in their latest communications have maintained their alleged force majeure stance citing various reasons such as Russian sanctions on its LNG source/portfolio and mandate from German authorities (BnetzA) for ensuring energy security for Europe for their inability to deliver LNG cargoes,” Minister of State for Petroleum and Natural Gas Rameswar Teli had told the Lok Sabha in a written reply to a question on March 23 this year.

However, “while SMTS maintains its force majeure stance, as on date SMTS has informed that they shall be able to supply two cargoes (shipload) in March 2023 and two in April 2023,” he had added.
To mitigate the shortfall in Russian supplies, GAIL imposed supply cuts to users from mid-July 2022 to mid-March 2023.

In order to meet the shortage, GAIL sourced spot LNG volumes from the domestic /international market and also partially/fully stopped its petrochemical complex at Pata in Uttar Pradesh to fulfilling supply obligations to the customers. Gupta said all the supply cuts have been restored with effect from March 16. Under the deal, GMTS was to progressively increase supplies to GAIL. It shipped 2 million tonnes of LNG in 2021 and was to supply 2.5 million tonnes or a minimum of 36 cargoes in the calendar year 2022. The full volume of 2.85 million tonnes is to be reached in 2023.

GAIL received one cargo of LNG in June 2022 and nothing after that. Company officials said Sefe was supplying cargoes from its non-Russian portfolio in Egypt, United Arab Emirates and the United States. Because of the force majeure, they cannot supply from Russia, so they are giving GAIL LNG from non-Russian portfolios.

(With inputs from PTI)

Also Read: European Union begins emergency gas talks as Russia abruptly suspends supplies to Poland and Bulgaria

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