Gazprom again reduced gas supplies for Engie

“Gazprom” informed the French energy company Engie about the reduction in gas supplies due to disagreements on a number of contracts. Bloomberg reported this on August 30, citing a company representative, without disclosing the details of the dispute.

A spokesman for Engie told Vedomosti that the company had secured all the required volumes of gas for itself and its customers, and had also “taken a number of measures to help mitigate the financial or physical impact” of a potential cut in Russian gas supplies. He also recalled that “Gazprom” has already significantly reduced supplies since the start of the Special Military Operation (SVO) in Ukraine to around 1.5 TWh per month (about 145.7 million cubic meters per month), which “corresponds to the total annual volumes of Engie gas supplies to Europe, exceeding 400 TWh.” He did not specify by how much the volume of deliveries was reduced, and also what the disagreements of the parties were.

Late on the evening of August 30Gazprom” nevertheless explained what the contradictions with Engie are. The message of the Russian company states that the French company’s gas exports have been suspended “due to non-payment for July deliveries in full.” “In this regard, Gazprom Export notified Engie of a complete suspension of gas supplies starting from September 1, 2022, until the receipt of funds for the supplied gas in full,” Gazprom said.

As of the end of the business day on August 30, Gazprom Export had not received full payments for gas supplied by Engie in July under existing contracts, the Russian company said in a statement. Gazprom refers to the March 31 decree of Russian President Vladimir Putin on gas supplies, which prohibits “further supply of natural gas to a foreign buyer if the buyer has not made payment in full within the contractual payment period.”

We are talking about a decree introducing a “ruble scheme” for the export of pipeline gas to unfriendly countries (before that, Gazprom’s contracts prescribed payments in euros or dollars). The new model assumes that the buyer of gas must make a payment in foreign currency to a special account with Gazprombank, then exchange these funds for rubles and transfer them to Gazprom’s account. Payment obligations are considered fulfilled at the moment when the rubles are received on the account of the Russian company.

After the introduction of the ruble scheme, a number of Gazprom’s European counterparties immediately refused to pay under this model, but the largest buyers continued to purchase gas. The refusal of Engie from ruble payments was not reported.

According to the explanations of the European Commission regarding payments for Russian gas, European companies are forced to consider payment for gas in euros as a fact of fulfilling their own contractual obligations. From the point of view of the EC, it is the transfer of funds in foreign currency to the supplier that becomes the key stage in mutual settlements. But “Gazprom» in accordance with Russian legislation, it is forced to consider the crediting of money in Russian currency after conversion as a fact of payment for deliveries. “Since both companies are forced to comply with the national legislation of the country in which they conduct their business, disputes may arise between them in the interpretation of certain provisions of the contract,” the senior analyst concludes. Alfa bank Nikita Blokhin.

For 7.5 months of 2022, the export of Russian pipeline gas to non-CIS countries, according to Gazprom, decreased by 36% compared to last year, to 78.5 billion cubic meters. m. On the reduction of supply volumes “Gazprom” informed its partners in the EU at the beginning of June. In particular, gas exports via Nord Stream were reduced by 40%, from 167 million cubic meters. m up to 100 million cubic meters. m per day. In Gazprom, this was explained by a decrease in capacity at the Portovaya compressor station (CS) due to the Siemens turbines in Montreal. Then the Italian Eni announced a reduction in gas supplies by Gazprom by 15%, the German Uniper – by 15%, confirmed the reduction without disclosing specific figures, and the Austrian OMV (Vedomosti wrote about this on June 16).

Vedomosti sent inquiries to Gazprom’s key partners in the EU, in particular Uniper, Eni, OMV.

According to BP, in 2021 France consumed about 43 billion cubic meters. m of gas. According to the International Energy Agency, the Russian Federation supplies France with about 14 billion cubic meters annually. m of gas.

At the same time, at the end of July, Nord Stream exports decreased to 33 million cubic meters. m per day, and from August 31 to September 3, exports will completely stop due to the planned repair of the pipeline, Gazprom reported.

According to the European Network of Gas Transportation System Operators (ENTSOG) and Vedomosti, on August 29, Gazprom exported about 119 million cubic meters to the EU. m of gas against 437.6 million cubic meters. m a year earlier on the same date.

Press Secretary of the Russian President Dmitry Peskov said on August 30 that there are no “other problems than technological ones” preventing an increase in the volume of Russian gas exports to the EU. “Russia was and remains ready to fulfill all its obligations,” he stressed.

“Engie doesn’t have much leverage in the arsenal on “Gazprom“. If the direct fault of the supplier is revealed, the energy company may demand compensation for penalties within the sanctions specified in the contract, the most extreme option is to file claims with the EU Arbitration Court,” said Yury Fedyukin, managing partner at Enterprise Legal Solutions.

At the same time, the expert stressed that interruptions in gas supplies are a problem that concerns all European counterparties of Gazprom and directly affects the energy security of the EU. Therefore, the actual solution of this issue, according to him, will depend on the political situation.

According to Alexei Grivach, Deputy General Director of the National Energy Security Fund, the situation with Engie may lead to a further decrease in Russian gas exports to the EU, which will result in another increase in spot prices. According to the ICE exchange, on August 30 at the TTF hub in the Netherlands, September futures were worth about $2,700 per 1,000 cubic meters. m.

Blokhin objects: the reduction in Gazprom’s supplies to Engie will not lead to a significant reduction in Russian gas exports to the EU. According to him, given the shortage of gas on the European market, the volumes, for one reason or another, not chosen by the French side, with a high degree of probability “will find their buyer among other counterparties of the Russian monopoly.” According to the expert, in the current situation, the export of pipeline gas to the EU will entirely depend on the technological factor due to access to the capacities of the Ukrainian GTS and the number of Nord Stream gas pumping units.

According to the explanations of the European Commission regarding payments for Russian gas, European companies are forced to consider payment for gas in euros as a fact of fulfilling their own contractual obligations. From the point of view of the EC, it is the transfer of funds in foreign currency to the supplier that becomes the key stage in mutual settlements. But “Gazprom» in accordance with Russian legislation, it is forced to consider the crediting of money in Russian currency after conversion as a fact of payment for deliveries. “Since both companies are forced to comply with the national legislation of the country in which they conduct their business, disputes may arise between them regarding the interpretation of certain provisions of the contract,” concludes Blokhin.