MOSCOW, June 1. /TASS/. Gazprom Export will suspend oil supplies to the leading Danish energy company Orsted and to Shell Energy Europe Limited due to non-payment for gas supplied in April and the refusal to pay in rubles, the Russian gas export company said.
Gazprom Export said on Tuesday that as of the close of business of May 31 (the due date stipulated in the contract), it had not received the payment for gas supplies in April from Orsted. In this regard, the company had notified Orsted about the suspension of gas supplies from June 1, 2022 and until payments are made in accordance with the procedure set forth by the executive order of the Russian president.
Orsted is one of the leaders of the Northern Europe’s energy market. The Danish government holds the 50.1% stake in the company.
Therefore, Denmark will join Poland, Bulgaria, Finland and the Netherlands, who have stopped receiving Russian natural gas because of their refusal to pay in rubles. Orsted said it would not accept the terms of payment and would consider termination of gas supplies a contract violation.
Russian natural gas is delivered to Denmark under a long-term contract signed in 2006, which is due to expire in 2030. Russian gas deliveries to the country began in 2011, following the launch of the Nord Stream gas pipeline.
According to Russia’s Federal Customs Service, Russia exported about 1.97 billion cubic meters of gas to Denmark in 2021, up 6.5% since 2020. This accounts for 66% of the country’s overall gas demand.
Suspension of gas deliveries to Shell
The Russian company will also halt supplies of gas to Shell Energy Europe Limited under the contract for deliveries to Germany, also due to non-payment for gas supplied in April.
The contract, valid until 2031, stipulates deliveries of up to 1.5 billion cubic meters of gas annually.
On February 28, Shell announced it was withdrawing from all joint projects in Russia, including the Nord Stream 2 pipeline and the Sakhalin-2 project to produce liquefied natural gas, where it held a stake of 27.5%. On March 8, the company announced the intention to start a gradual withdrawal from Russian petroleum products, pipeline gas and LNG. Shell’s charges related to the intention to abandon projects in Russia and fuel supplies related to Russia amounted to $4.24 bln in January-March 2022, the British oil and gas company said in its Q1 results report.
New payment scheme
In late March, Russian President Vladimir Putin requested moving payments for gas supplies to unfriendly countries to rubles, saying that Moscow would refuse accepting payments on such contracts in discredited currencies, including dollars and euros. He also tasked the government with giving Gazprom an instruction on amending present contracts. On March 31, Putin signed a decree on rules of gas trade with unfriendly countries, which stipulates a new system of contract payment.
The new procedure of payment for Russian pipeline gas in rubles by buyers from unfriendly countries came into force on April 1. Those buyers are required to open special ruble and foreign currency accounts with Gazprombank to pay for gas supplies. Currency conversion will be carried out on Russian exchanges. In case of incomplete payment, the Russian customs is authorized to ban deliveries. The government commission for the control of foreign investment in Russia has the right to issue exceptions to these rules for individual buyers.
On May 16, Bloomberg reported citing a representative of the European Union that the European Commission has extended a new regulation, according to which European importers will be able to continue to pay for Russian gas without violation of the sanctions imposed on Moscow. According to the updated recommendation of the EC, European companies should clearly state that they consider their contractual obligations fulfilled after they pay in euros or dollars, without waiting for their conversion into rubles.