State-run GAIL (India) has alleged that ArcelorMittal Nippon Steel India (AMNS) made misleading statements to seek additional liquefied natural gas (LNG) supplies and has asked the Delhi High Court to dismiss a plea by the latter regarding supply disruptions.
In a response to ArcelorMittal’s petition which Moneycontrol has accessed, GAIL said the steel manufacturer has not disclosed the complete facts of the case but sought to wriggle out of an agreement alleging economic duress.
The statement by the Public Sector Undertaking (PSU) comes after AMNS moved the Delhi High Court seeking a stay on GAIL’s terminated LNG supply for its steel plant in Hazira, Gujarat.
In the response dated November 6, GAIL said that the petition deserves to be dismissed and no interim relief, as sought for by the petitioner AMNS ought to be granted.
A detailed query sent to AMNS seeking comments on GAIL’s response remained unanswered.
The contract
The two companies had entered into an LNG sale and purchase agreement (LSPA) for the sale and delivery of LNG on a ‘take or pay’ basis between 2021 and 2025. According to the LSPA, GAIL was to supply an annual contracted quantity (ACQ) of LNG of 11.87 TBtu during each contract year. The state-run gas distributor, however, stopped LNG supply to AMNS in October 2023 after disputes arose between the companies amid GAIL’s failure to supply LNG in 2022.
AMNS alleged that GAIL did not supply LNG between August 2022 and December 2022, which the latter had claimed was due to a force majeure. AMNS has challenged the existence of the force, citing that GAIL could still have supplied LNG to them considering they have many suppliers.
While AMNS intends to adjudicate the larger dispute by an arbitration at the Delhi International Arbitration Centre (DIAC), the steel manufacturer has also filed a petition at the Delhi High Court asking the court to direct GAIL to continue the sale and delivery of LNG in accordance with the LSPA.
The force majeure
GAIL said it had supplied 15.44 TBtu LNG to AMNS until September 7, which is 3.57 TBtu in excess of the contractual requirement of 11.87 TBtu. The company said the excess quantity of LNG supplied in the contract year 2023 was in line with the disruption in the supply of LNG and the force majeure event that occurred in 2022, because of which GAIL was unable to supply LNG in the months of August 2022 and December 2022, totalling to a short supply of 5.35 TBtu.
According to GAIL, it agreed to supply 17.23 TBtu LNG, but that it would not be able to supply additional LNG until AMNS re-confirms the revised agreement.
Arcelor Mittal has also alleged in its petition that GAIL tried to employ arbitrary tactics to coerce them into accepting the defaulted supplies of LNG belatedly, this led them to file for arbitration in June 2023. AMNS has claimed a total of Rs 1,400 crore towards compensation for non-supply of LNG. The plea noted that while AMNS accepted LNG from GAIL, it was without any prejudice to their rights and contentions in the arbitration.
GAIL has further contended that it does not have ready and available LNG to effect any further supplies to AMNS and they are free to source the LNG in the open market at the prevalent prices as it is a readily available product. The PSU has also alleged that AMNS’ requirement is in excess of the LNG quantities.
In May 2022, Russia’s Gazprom Marketing and Trading Singapore (GMTS) halted supplies of natural gas to GAIL citing the war in Ukraine. As a result, the gas distributor had to cut supplies to clients.
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