Stalled gas supplies may be part of EAM’s Russia agenda

  • Despite a long-term deal, Gazprom stopped supplies in May after the Ukraine war broke out

Rituraj Baruah, Shashank Mattoo
First Published6 Nov 2022
Gazprom began supplies in 2018 and was to reach full volume in 2023, with at least 36 liquified natural gas cargoes this year.  istock
Gazprom began supplies in 2018 and was to reach full volume in 2023, with at least 36 liquified natural gas cargoes this year. istock

External affairs minister S. Jaishankar is expected to drive home the need to resume gas supplies to India—contracted but stalled for six months— during a visit to Russia this week.

The 7-8 November visit comes against the backdrop of Gazprom, the world’s largest gas company, continuing to default on its supplies to state-run GAIL Ltd under its long-term contract.

On 3 November, the ministry of external affairs said that during the visit, Jaishankar will meet his Russian counterpart, Sergei Lavrov, to discuss regional and international developments. “External affairs minister will also meet deputy Prime Minister of the Russian Federation and Minister of Trade and Industry, Denis Manturov, his counterpart for the India-Russia Inter-Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation (IRIGC-TEC),” the ministry said.

An official aware of the development said: “The external affairs minister is going, so we hope that a way forward would be found. The Gazprom issue can be a part of the talks.”

Another official said that although talks have been underway, no headway has been made so far, adding that deliberations are expected to bear fruit in times ahead. “They will come around. Till now they had an active market in Europe. With Europe cutting its dependence on Russian gas, Russia has to find buyers for its gas,” said the second official.

Queries sent to the ministries of petroleum, external affairs, GAIL and Gazprom remained unanswered at press time.

With global gas prices rallying, Gazprom has stopped supplying to GAIL from May 2022 under their long-term contract as it is getting better prices in the spot market, making GAIL resort to spot purchases. This in turn has tapered supplies to several sectors including fertilizers.

Following the default in supplies, GAIL has had to purchase gas at prices as high as $40 per mmBtu (million British thermal units), compared with contract prices of $15-17 per mmBtu under the pact signed in 2012.

Gazprom began supplies in 2018 and it was to reach full volume in 2023. This year, the company was to supply at least 36 liquified natural gas cargoes to GAIL. The deal was signed by Gazprom Marketing and Trading Singapore (GMTS), on behalf of Gazprom.

GMTS was then moved to Gazprom Germania but subsequently, in early April, the company gave up ownership of the German unit without giving a reason and placed parts of it under Russian sanctions.

According to the India deal, GMTS was to supply LNG to GAIL from its production units in Russia. However, the sanctions meant that it cannot source LNG from Russia.

One of the officials mentioned above also said that India is looking at various options for LNG suppies, including newer sources for both spot and long terms.

Mint reported earlier that India is in talks with Angola and Algeria to procure liquefied natural gas on long-term contracts and that it has also reached out to the US, UAE, Saudi Arabia and Iraq at a government-to-government level to secure additional spot LNG cargoes at affordable prices.

To be sure, global spot prices of LNG have eased in the past few weeks and currently are around $28 per mmBtu. However, with the onset of winter, demand for gas is likely to spike, taking prices up again.

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