GAIL Initiates International Arbitration Against Former Gazprom Unit

State-run GAIL made a significant move recently by filing an arbitration case against SEFE Marketing & Trading Singapore, a former unit of Russian gas giant Gazprom. GAIL is seeking damages amounting to $1.8 billion for the non-supply of liquefied natural gas (LNG).

According to a BSE filing, the largest gas utility in the country initiated the claim in the London Court of International Arbitration on November 30, 2023. The dispute revolves around the non-supply of LNG cargoes to GAIL under a long-term LNG contract, with the claims reaching up to $1.817 billion. GAIL is also seeking alternative reliefs, including non-monetary reliefs.

The saga began in 2012 when GAIL entered into a 20-year deal with Gazprom to purchase 2.85 million tonnes (mt) of LNG. While the supplies commenced six years later, they were supposed to reach their full volume in 2023. Gazprom Marketing and Trading Singapore (GMTS) had originally signed the deal on behalf of Gazprom. However, GMTS transitioned to Gazprom Germania in early April 2022 after Gazprom relinquished ownership of the German unit (Sefe). Following this transition, the former Gazprom unit defaulted on LNG supplies to India.

The disruption in supplies to GAIL occurred when Western nations imposed sanctions on Russia due to its invasion of Ukraine on February 24, 2022. This led to a force majeure, halting supplies to India from June 2022. It wasn't until April of the following year that LNG supply to GAIL resumed, this time under the management of Sefe.

HBL