Russia's Novatek, India's GAIL poised to seal gas sales deal

By Nidhi Verma

NEW DELHI (Reuters) - Russia's largest liquefied natural gas (LNG) producer, Novatek, is close to a deal to supply gas to GAIL (India) Ltd as it seeks alternative markets to Europe, three industry sources said.

The companies are negotiating the terms of a contract and could seal an agreement within a week, the sources said, adding volumes would depend on logistics, such as shipping and insurance.

GAIL and Novatek did not respond to Reuters' requests for comment.

Russia is looking for outlets for its energy resources after Western countries cut back their purchases following its invasion of Ukraine nearly a year ago.

For its part, GAIL needs to recover after its profit sank 93% in the three months to December from a year earlier as a result of disrupted supply from a former unit of Russian giant Gazprom (MCX:GAZP).

A preliminary deal could be signed during Novatek Chairman Leonid Mikhelson's visit to India next week for an energy conference, they said, speaking on condition of anonymity because they were not authorised to speak to the media.

GAIL, India's largest gas distributor, has rationed gas supplies and cut runs at its petrochemical plants after supplies under a 20-year deal with Gazprom Marketing and Trading Singapore (GMTS) were halted.

Novatek is offering a few LNG cargoes every month under a long-term deal to GAIL on a free-on-board basis, meaning the buyer arranges for ships and insurance, the sources said.

The Indian company, however, is asking Novatek to deliver gas to Indian ports as shipping and insurance companies are wary of providing services for Russian oil and gas following the West's imposition of sanctions on Moscow in response to its invasion of Ukraine.

GAIL's head of finance Rakesh Kumar Jain last week said his company was in talks with various suppliers, including Abu Dhabi National Oil Co, for gas purchases to meet increasing demand in the country.

"We are actively in discussion with a couple of long-term LNG suppliers...Hopefully, we should be able to conclude at least 1 contract shortly," A. Kaviraj, executive director at GAIL told an analyst call.

GAIL agreed to a 20-year deal with GMTS in 2012 for annual purchases of an average of 2.5 million tonnes of LNG on a delivered basis.

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At the time, GMTS was a unit of Gazprom Germania, now called Sefe, but the Russian parent gave up ownership of Sefe after Western sanctions.

    The initial contract with GMTS was also for supplies from the Yamal project in the Arctic, but the former Russian entity was arranging supplies from elsewhere to cut freight costs as the deal was done on delivered basis, the sources said.