GAIL reverses R-LNG supply cut for customers

Vol 25, PW 8 (24 Mar 22) Midstream, Downstream, Renewables

GAIL's customers for R-LNG are relieved after it partially restored supplies this month, which GAIL had cut following Russia's invasion of Ukraine.

GAIL issued a notice to customers on March 21 (2022), saying it was restoring 'term' R-LNG supplies from 80% of contracted volumes to 90%, with effect from March 22 (2022). "This came as a great relief," said a CGD company and major GAIL customer for domestic gas and R-LNG.

Another source adds GAIL's supply restoration reverses one of two cuts introduced last month (February) in response to global gas supply disruptions following Russia's invasion of Ukraine on February 24 (2022). Yet global gas supplies had been tightening days before the actual Russian invasion.

On February 15, GAIL told its customers it was cutting 'term' R-LNG supplies by 10% of contracted volumes. A fortnight later, GAIL sent another notice saying it was cutting contracted term R-LNG volumes by another 10% because of supply constraints.

"Since early March, GAIL's 'term' R-LNG customers had been hit by a 20% supply cut," we hear. "That is, until the March 21 (partial restoration) order."

GAIL's March 21 notice confirms that supplies would remain at 90% until March 31. According to the GAIL contract terms, customers who continued to take their entire contracted gas volumes over and above the cuts announced are charged $39/mmbtu or 120% of the "highest-priced gas" it supplies.

By contrast, GAIL's contracted term R-LNG price is $15/mmbtu. GAIL's term R-LNG customers are relatively better off than Gujarat Gas customers, still facing a 20% cut in contracted volumes because of supply disruptions caused by the Russia-Ukraine conflict.

Gujarat Gas buys all its spot and 'term' R-LNG from the parent company GSPC. Customers taking more than 80% of their contracted supplies must pay a similar exorbitant rate as GAIL's customers.