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GAIL in talks with Gazprom to postpone and renegotiate LNG deal

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LNG Industry,

According to Reuters, Gazprom and GAIL India Ltd are holding discussions to delay and renegotiate a gas purchase agreement. Weak demand has reportedly meant that GAIL has had to stall some of its contracted supply.

Reuters reports that spot cargoes cost approximately US$5/million Btu in the current market, whilst Gazprom’s LNG costs over US$7/million Btu.

The 2.5 million tpy, 20-year agreement was originally signed in 2012, with deliveries expected to commence in 2018 – 2019. Gazprom initially said that it would source the gas from the Shtokman LNG facility in the Barents Sea – which has now been cancelled – but is now planning to source supply from other facilities, including the Yamal LNG project in Russia. Reuters reports that GAIL is contesting that this is a breach of contract. Nevertheless, a source from Gazprom reportedly added that the Indian company is not planning to completely abandon the agreement. Rather, they are merely looking to postpone the deliveries.

Edited from various sources by David Rowlands

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