As the former Gazprom facility reduces supplies, GAIL is rationing gas

2 Aug 2022 , 12:38 PM

After imports were restricted as part of its agreement with a former division of the Russian energy giant Gazprom, the largest gas distributor in India, GAIL (India) Ltd, began gas rationing, restricting supply to fertilizer and industrial clients, according to news reports.

News Reports stated that lower gas supply will have an impact on India's urea production and that a sustained cut will increase imports of the soil fertilizer.

The now-Gazprom Germania subsidiary Gazprom Marketing and Trading Singapore (GMTS) has failed to deliver certain liquefied natural gas (LNG) cargoes to GAIL and has indicated that it might not be able to meet its obligations under their long-term agreement.

According to the reports, GAIL, which imports, distributes, and runs India's largest gas pipeline network, has reduced supplies to some fertilizer factories by 10% and limited gas sales to industrial clients to the lower tolerance level of 10%—20%.

In order to conserve gas for other consumers, they said that the state-run corporate is running its petrochemical facility at Pata in northern India at roughly 60% capacity. The reports noted that GAIL had advanced maintenance closure of some units at the 810,000 tonnes per year plant.

According to an industrial customer that talked to ET, GAIL has limited gas amounts to a "take or pay level," which is the lowest level at which the customer won't be charged a fee.

According to a different report, GAIL's actions will result in a reduction in gas deliveries to customers of roughly 6.5 million cubic metres per day, while imports under the Gazprom agreement were typically about 8.5 mcmd.

A 20-year agreement for the typical annual purchase of 2.5 million tonnes of LNG was made between GAIL and Russia's Gazprom in 2012. The supply duties under the contract commenced in 2018.

GMTS executed the agreement on behalf of Gazprom. During that period, Gazprom Germania was a part of the Russian state-owned enterprise.

However, in the early days of April, Gazprom abruptly relinquished control of Gazprom Germania and put some of its activities to Russian limitations due to Western sanctions against Russia for its invasion of Ukraine.