New Delhi: State-run Gas Authority of India Ltd (GAIL) is making spot purchases from the United States (US), Qatar and Australia to bridge the gap after a former unit of Russia’s Gazprom defaulted on LNG deliveries, two sources aware of the matter told PSU Watch. Gazprom is paying a ‘meagre’ penalty for the liquefied natural gas (LNG) cargoes it has failed to deliver to India since early June to absolve itself of all contractual liabilities.
Sources said that no LNG cargoes have been received from Gazprom since May.
Spot LNG purchases to cost 4X
An official who spoke to PSU Watch said that GAIL will be spending at least four times more on procuring LNG from spot markets in comparison to the long-term contracts. The cost of LNG under long-term contract works out to be around USD 12-14 per mmBtu.
GAIL had in 2012 signed a 20-year deal with Russia’s Gazprom to buy 2.85 MT of LNG. Supplies started in 2018 and the full volume was to reach in 2023. In the current calendar year, Gazprom had to supply at least 36 LNG cargoes to GAIL.
The deal had been signed by Gazprom Marketing and Trading Singapore (GMTS), on behalf of Gazprom, with GAIL. GMTS was moved to Gazprom Germania. And in early April, Gazprom gave up the ownership of the German unit without giving a reason and placed parts of it under Russian sanctions.
As per the deal, GMTS was to supply LNG to GAIL from its portfolio of production. But the Russian sanctions mean it cannot source LNG from Russia.