State-owned Gail India has filed a lawsuit against a former unit of Russian energy giant Gazprom, seeking $1.82 billion in damages for non-delivery of LNG.
The gas utility has filed an arbitration claim with the London Court of International Arbitration for “non-delivery of LNG cargoes under long-term contracts”, PTI reported.
In 2012, Gail signed a 20-year agreement with Gazprom Marketing and Singapore (GMTS) to purchase up to 2.85 million tonnes of LNG per year from the latter.
At the time, GMTS was a unit of Gazprom Germania, now called Sefe.
In April 2022, GMTS was transferred to Gazprom Germania after Russian parent company Gazprom relinquished ownership of the German unit (Sefe) due to sanctions imposed by Western nations following Moscow’s invasion of Ukraine.
As a result, Sefe stopped supplying LNG to the Indian company in June 2022 to meet its own needs. However, it resumed supplies in April 2023.
As per the LNG deal, the Russian company is required to start supplies in 2018 and reach the full volume in 2023.
In a stock exchange filing, Gail said it had sued “SEFE Marketing & Trading Singapore Pte Ltd (formerly Gazprom Marketing and Trading Singapore Pte Ltd)” and was seeking “up to $1.817 billion and alternative relief, including non-monetary relief”.
According to Gail, the agreement was for a portfolio and LNG supplies cannot be stopped. If there had been problems with sourcing from Russia, the supplier could have made cargo arrangements from alternative locations.
In November 2023, Gail rejected a compensation offer from Gazprom’s former unit for undelivered LNG, as it wanted to retain the right to the missed LNG cargoes.
Sefe’s compensation offer is equivalent to 20% of the LNG cost, in line with the terms of the original LNG contract.
One of the sources said: “We are not accepting the penalty because it would give them (Sefe) a way out of the contractual obligation. We don’t want to lose our right to buy the cargoes again”.