In December 2023, GAIL sued SEFE in London for failing to deliver LNG under a 2012 agreement. Credit: Piotr Swat / Shutterstock.com.

State-owned utility company GAIL (India) has reached a $285m settlement in a claim against SEFE Marketing & Trading Singapore (SEFE), a former unit of Russian energy company Gazprom, for non-delivery of liquefied natural gas (LNG) under a long-term contract.

In December 2023, GAIL initiated legal proceedings in the London Court of International Arbitration against SEFE for failing to deliver on a 20-year agreement signed in 2012, which stipulated the annual purchase of up to 2.85 million tonnes (mt) of LNG from SEFE.

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GAIL had sought $1.8bn in damages for the default in delivery of committed cargoes by SEFE.

Gazprom relinquished ownership of SEFE following Western sanctions imposed on Moscow after Russia’s 2022 invasion of Ukraine. Now under the control of the German Government, SEFE ceased supplying LNG to GAIL in June 2022, claiming the need to meet its own demand. This halt coincided with a period when global LNG prices soared to record levels.

GAIL’s contract with SEFE provided for deliveries at a pre-agreed price, which was significantly lower than the spot market rates during the price spike. The Indian company maintained that the contract was a portfolio agreement and that supplies should not have been halted, and argued that SEFE should have arranged for cargo from alternative locations if sourcing from Russia was problematic.

The resumed LNG supplies from SEFE in March 2023 led to GAIL seeking damages for the period of non-supply.

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The full volume of 2.85 million tonnes was expected to be reached by 2023, with supplies having commenced in 2018.

Last October, SEFE signed a ten-year contract with ConocoPhillips for natural gas supply.

This arrangement is a key component of SEFE’s approach to guarantee a reliable fuel supply for Europe, particularly in light of the geopolitical changes that have occurred since the beginning of the Russia-Ukraine conflict in 2022.