Gazprom has announced that it has completely suspended gas supplies to Denmark’s Orsted Salg & Service A/S “due to failure to pay in Rubles”.
The announcement was made on the company’s Twitter page and included a link to a press release on the Gazprom website, although Rigzone is currently not able to access Gazprom’s site and has not been able to for some time.
In a statement posted on its website on Tuesday, Ørsted announced that Gazprom Export had informed Ørsted that the company would halt the supply of gas to Ørsted on June 1, 2022, at 6:00 CEST.
“At Ørsted, we stand firm in our refusal to pay in Rubles, and we’ve been preparing for this scenario, so we still expect to be able to supply gas to our customers,” Mads Nipper, the group president and CEO of Ørsted, said in the statement.
“The situation underpins the need of the EU becoming independent of Russian gas by accelerating the build-out of renewable energy,” Nipper added in the statement.
In a statement posted on its website on May 30, Ørsted revealed that it had repeatedly informed Gazprom Export that it would not pay for gas supplies in Rubles. The company warned in the statement that there was a risk that Gazprom Export would stop supplying gas to Ørsted.
“Since there is no gas pipeline going directly from Russia to Denmark, Russia will not be able to directly cut off the gas supplies to Denmark, and it will thus still be possible for Denmark to get gas,” Ørsted said in the statement.
“However, this means that the gas for Denmark must, to a larger extent, be purchased on the European gas market. We expect this to be possible,” Ørsted added.
The company outlined in the statement that it had been preparing for this scenario to minimize the risk of its gas customers, which it pointed out are primarily “major” companies in Denmark and Sweden, experiencing shortfalls in gas supplies.
“Ørsted has storage capacity in e.g. Denmark and Germany, and we are currently filling up these storage facilities to secure gas supplies to our customers and contribute to the market’s security of supply,” Ørsted said.
“We are in ongoing dialogue with the authorities about potential scenarios, and we trust that the authorities, who have the overall overview of the supply situation in Denmark, are prepared for the situation. We will remain in close dialogue with the authorities regarding the situation,” the company added.
Ørsted outlined in the statement that a potential halt of gas supplies by Gazprom Export did not change its financial outlook for the 2022 financial year or the expected investment level announced for 2022 and did not change its strategic ambition and long-term financial guidance.
The company highlighted that, in the first quarter, it reduced the overall hedge level for its Gazprom Export contract to balance the risk against a scenario where the supply of Russian gas is disrupted. Ørsted has previously announced that it will donate all 2022 net profits, if any, after hedges and tax from the Gazprom Export contract to humanitarian aid in Ukraine.
On April 1, Ørsted confirmed that it had received a demand from Gazprom Export to pay for gas supplies in Rubles. In a company statement at the time, Ørsted said it had no intention of paying in Rubles.
In a company statement back in March, Ørsted highlighted that it had a long-term take-or-pay gas purchase contract with Gazprom Export. The contract was entered into in 2006 and expires according to its terms in 2030, Ørsted highlighted at the time. The company revealed that the contract could not be terminated at that point in time but said it would not be extended. A long term take-or-pay contract was the industry standard for procuring gas at the time of signing, Ørsted noted in the statement.
In February, Ørsted said the Russian aggression goes against everything that Ørsted stands for. As a consequence of the development, Ørsted outlined that its management had undertaken a range of measures, including stopping all sourcing of biomass and coal for its power stations from Russia, not entering into new contracts with Russian companies, making sure that no direct Ørsted suppliers for the build-out of renewable energy are Russian.
In a statement posted on its Twitter page on Tuesday, Gazprom announced that it had completely suspended gas supplies to Netherlands’ GasTerra B.V. “due to failure to pay in Rubles”. In a statement posted on its website on Monday, GasTerra said it had decided not to comply with Gazprom’s “one-sided payment requirements”.
In a market note sent to Rigzone in April, Rystad Energy analysts Kaushal Ramesh and Nikoline Bromander noted that Russia had fired the first shot back at the West with a gas embargo on Poland and Bulgaria.
Source: Rigzone.com
