Russian gas giant Gazprom triggers legal clause over Europe contract woes

Gazprom has been delivering less gas than ordered by customers over the past month. PHOTO: REUTERS

LONDON (BLOOMBERG) - Gazprom declared force majeure on at least three European gas buyers, a move that may signal it intends to keep supplies capped, according to sources.

The Russian gas giant - which already curbed exports to Europe and closed its main pipeline for maintenance earlier this month - said in a letter dated July 14 that the legal clause applied to supplies over the past month, said the sources, who asked not to be identified because the information is private.

Gazprom has been delivering less gas than ordered by customers over the past month, with the company citing problems with turbines at its main pipeline to Europe that ends in Germany.

Flows via Ukraine have also declined since one of two main entry points on the border with Russia was shut due to the war.

It "does feel like a signal that the low flows could continue for longer than just the scheduled maintenance period," said Mr Trevor Sikorski, head of natural gas, coal and carbon at Energy Aspects.

Companies usually declare force majeure when an unforeseen event like a fire or natural disaster prevents them from complying with contracts.

Triggering the legal clause retroactively is "unusual, to say the least", Mr Sikorski said, adding that he expected European buyers to dispute the notice and seek compensation.

Reuters reported the move earlier.

Gazprom had no immediate comment.

Uniper has formally rejected Gazprom's declaration, saying the claim is unjustified, German newspaper Handelsblatt reported, citing a Uniper spokesman.

Russian gas exports to Europe via Ukraine started declining in May, when one of the main entry points was closed to ensure safety after forces invaded a key compressor station.

Shipments were curbed further last month, with Gazprom citing technical issues with gas turbines, one of which was stranded in Canada following repairs due to sanctions.

While Canada has said it will release the part, the move may signal that there is no chance of the turbine being returned before July 21, when the Nord Stream pipeline is set to start operating again, said Mr Jonathan Stern, a researcher at the Oxford Institute for Energy Studies.

"It may also be that the Russian government is happy to increase the pressure on Europe and is using this technical situation as a pretext for not resuming flows," he said.

Gazprom does not disclose terms of its contracts, but most of its long-term agreements in Europe normally have minimal volumes and maximum volumes it is obliged to deliver - per month, a quarter and over a year.

European gas prices were little changed.

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