GAIL sinks as Russia’s Gazprom invokes force majeure on LNG cargo

On August 2, following news sources claimed that Russia’s Gazprom had triggered force majeure on its long-term liquefied natural gas contracts with the company, shares of GAIL India came under pressure.

According to several media sources, Gazprom failed to deliver some LNG cargoes to GAIL from Singapore as scheduled and instead chose to reroute those cargoes for delivery in Europe, where the Russian business could sell its gas at a higher spot price.

GAIL is now forced to source alternative supplies from the global spot market, where prices are nearly three times those of long-term contracts, as a result of Gazprom’s lack of natural gas supply.

According to Reuters, the state-owned gas trading corporation reduced LNG delivery to fertilizer businesses and other industries on August 1 to ration the essential fuel.

Although GAIL has access to the spot market for LNG purchases, a CNBC-TV18 report said that the company’s customers were not willing to pay the higher costs. According to the research, pricey LNG from GAIL is not likely to be purchased by power firms in particular.

International markets have been shocked by the Gazprom unit in Singapore’s diversion of LNG supplies. Gazprom is now controlled by the German government as a result of Russia’s invasion of Ukraine. After Russia severely reduced its natural gas exports to Europe in retaliation for the various sanctions the US and the EU have placed on the country, Europe is in urgent need of LNG supplies. At Rs 143.50 at 10 AM, 2.6 percent on NSE.