State-owned Gail India has filed a lawsuit against a former unit of Russian energy giant Gazprom, seeking $1.82bn in damages for the non-delivery of LNG.
The gas utility has lodged an arbitration claim, alleging “non-supply of LNG cargoes under long-term contract” in the London Court of International Arbitration, reported PTI.
In 2012, Gail signed a 20-year agreement with Gazprom Marketing and Singapore (GMTS) to purchase as much as 2.85 million tonnes per annum of LNG from the latter.
At that time, GMTS was a unit of Gazprom Germania, which is now called Sefe.
In April 2022, GMTS was moved to Gazprom Germania after the Russian parent Gazprom gave up the ownership of the German unit (Sefe) due to the sanctions imposed by the Western nations following Moscow’s invasion of Ukraine.
Subsequently, Sefe stopped LNG supplies to the Indian company in June 2022 to meet its own demand. However, the company resumed supplies in April 2023.
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As per the LNG deal, the Russian company is entailed to commence supplies in 2018 and reach the full volume in 2023.
In a stock exchange filing, Gail said it has sued “SEFE Marketing & Trading Singapore Pte Ltd (erstwhile Gazprom Marketing and Trading Singapore Pte Ltd)” and is seeking “up to $1.817bn and alternative relief including non-monetary reliefs”.
According to Gail, the agreement was for a portfolio, and LNG supplies cannot be halted. Should there have been issues with sourcing from Russia, the supplier could have made cargo arrangements from alternate locations.
In November 2023, Gail rejected a compensation offer from Gazprom’s former unit for undelivered LNG as it looked to retain the right to the missed LNG cargoes, reported Reuters citing four familiar sources.
The Sefe’s compensation offer is equivalent to 20% of the LNG cost in line with the original LNG contract terms.
One of the sources said: “We are not accepting the penalty as this would give them (Sefe) an exit route from the contractual obligation. We don’t want to lose our right to buy the cargoes again.”