GAIL Delivered Setback in Bid to Renegotiate Gazprom LNG DealBy and
Russia is scheduled to start 20-year LNG supply deal in April
Indian utility struggles to find domestic buyers for its gas
GAIL India Ltd. received notification from Russia’s Gazprom PJSC that it plans to start deliveries of liquefied natural gas through a contract the Indian buyer is trying to renegotiate, according to people with knowledge of the matter.
The world’s largest gas producer wrote to GAIL this month saying it’s preparing to send cargoes from April under the 2.5 million-ton-a-year deal that was agreed in 2012, according to the people, who asked not to be identified because the information is private. The notification, which is standard practice before a contract starts, is seen as a setback for GAIL’s efforts to renegotiate, said the people.
Gazprom and GAIL declined to comment.
GAIL, which has contracted new long-term volumes that account for almost half of India’s total LNG imports in the year to March, is struggling to find buyers in the local market where adverse tax provisions are hindering the use of the fuel. A lack of domestic buyers has forced the company to sell some LNG sourced from the U.S. on the international market.
GAIL Chairman B.C. Tripathi said late last year the company was seeking to overhaul the contract with wholly owned unit, Gazprom Marketing and Trading Singapore, and discussing terms including duration, price and source of supply. In October, he said Petronet LNG Ltd., in which GAIL is a key shareholder, successfully renegotiated two contracts and that GAIL was working toward renegotiating two more.
“There seems to be some finality to Russian supplies and that will boost GAIL’s volumes,” said Dhaval Joshi, an analyst at Emkay Global Financial Services Ltd. “Renegotiation can continue even after supplies commence as we have seen in the previous two LNG deals.”
Petronet LNG Ltd. reached an agreement to rework a liquefied natural gas supply agreement with Exxon Mobil Corp., Bloomberg News reported in September. The Indian company also renegotiated a similar deal for gas supplies with Qatar in 2015.
— With assistance by Elena Mazneva