GAIL (India) Ltd is rationing gas supplies to certain sectors to ensure that supplies to essential sectors are not disrupted after Gazprom PJSC invoked force majeure on its long-term liquefied natural gas (LNG) contracts with the company, officials from the state-run gas distribution company said.
GAIL did not respond to Moneycontrol’s query on the matter. But company officials, on condition of anonymity, confirmed that it is rationing supplies to certain customers in the urea and fertilisers sector, and industrial consumers.
“Our understanding is that it is a short-term problem and it may get resolved by the end of this month,” a senior official from GAIL said.
Officials also said that GAIL is not keen to buy more gas from the spot market to make up for the deficit from the disruption from Gazprom, given the elevated prices in the spot market. For instance, GAIL was sourcing LNG under the long-term pact from Gazprom at around $14 per mmbtu, while it may have to pay around $40 for the same in the spot market, industry players said.
“Getting alternate cargo is not very easy right now as there is a huge demand from Europe. GAIL will be cautious about sourcing expensive gas because there may not be enough takers for expensive gas among the end consumers,” a source in the know said.
Shares of GAIL declined almost 4 percent on the news to Rs 141.55 on the Bombay Stock Exchange.
Reuters reported on July 19 that Gazprom Singapore had failed to deliver some liquefied natural gas (LNG) cargoes to GAIL and had said it may not be able to meet supplies under their long-term deal.
In an interview with Moneycontrol in May, GAIL Chairman and Managing Director Manoj Jain said that the company had witnessed some challenges in supply from Gazprom’s German subsidiary. But industry sources said that the situation worsened in the last few weeks as Gazprom started diverting some cargo from Singapore to Europe to fetch better prices.
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