Russia's Gazprom defaults on five LNG cargoes to India - report

Quantum Commodity Intelligence - Russia has defaulted on supplying at least five LNG cargoes to India after what were described as "retaliatory sanctions" hit one of the companies that was set to receive supplies from Gazprom, according to a report carried by India's Economic Times.

India's largest gas firm GAIL has a long-term deal to import 2.85 million mt of LNG annually from a Singapore-based unit of Russian gas producer Gazprom, although the ownership of the company was reorganised and is now under Gazprom Germania.

But since June, Gazprom has defaulted on the supply of five contractual LNG cargoes, citing difficulty in sourcing gas due to sanctions, according to the report.

GAIL is now scouring for alternatives, including tying up supplies from other sources in the US and the Middle East. The energy firm was also reported to be exploring legal options to enforce the contract.

Sources told Quantum there had been a number of LNG contractual disputes this year, in part due to sellers looking to deliver minimum supplies under oil-linked term contracts and sell additional volumes on the spot market at much higher levels.

Benchmark LNG prices have soared to over $40/mmBtu in July as Asia faces increasingly stiff competition from Europe in securing LNG supplies. By contrast, term contract prices range between $13 and $20/mmBtu, according to consultancy Wood Mackenzie.

This suggests that the contractual dispute may be commercial in nature rather than political.

North Asian benchmark JKM futures for the Sep22 contract settled Tuesday at $37.50/mmBtu, while prices for the winter months are comfortably above $40/mmBtu.