Shell, Orsted to lose Russian gas from June 1 over refusal to pay under new system
MOSCOW. May 31 (Interfax) - Shell (SPB: RDS.A) and Denmark's Orsted have lost access to Russian gas supplies over their refusal to pay for them under the new rules, Gazprom Export said.
"Danish company Orsted Salg & Service A/S has notified LLC Gazprom Export that it does not intend to pay for gas in rubles in accordance with the Russian presidential executive order No. 172, dated March 31, 2022 and in accordance with the new arrangement proposed by Gazprom Export. As of the end of the working day on May 31, the deadline stipulated by the contract, Gazprom Export had not received payment from Orsted for gas supplied in April. Accordingly, Gazprom Export has notified Orsted that gas supplies will be suspended on June 1, 2022 and until payment is remitted in the manner prescribed by the aforementioned executive order," the Russian company said.
In addition, Shell Energy Europe Limited has notified LLC Gazprom Export that it does not intend to pay for gas in rubles in accordance with the Russian presidential executive order No. 172, dated March 31, 2022 and in accordance with the new arrangement proposed by Gazprom Export.
The contract is for the supply of up to 1.2 billion cubic meters of gas per year.
"As of the end of the working day on May 31, the deadline stipulated by the contract, Gazprom Export had not received payment from Shell Energy Europe Limited for gas supplied in April. Accordingly, Gazprom Export has notified Shell Energy Europe Limited that gas supplies will be suspended on June 1, 2022 and until payment is remitted in the manner prescribed by the aforementioned executive order," the Russian company said."
New payment system
Russian President Vladimir Putin signed a decree (No. 172) on March 31 on a "special procedure for foreign buyers' fulfilment of obligations to Russian suppliers of natural gas," under which payment for Russian pipeline gas supplied after April 1 to foreign counterparties specified in the decree must be made only in rubles.
Under this procedure, special "K" type ruble and foreign currency accounts are opened at the authorized financial institution, Gazprombank (GPB) , for foreign buyers. These accounts prohibit the suspension of transactions, freezing or debit of funds as part of foreign buyer's fulfillment of obligations that are not related to payment on contracts to supply natural gas. Foreign buyers pay for gas in the currency of the contract, which the bank then sells on the Moscow Exchange and transfers rubles to Gazprom. This is the point at which payment for the gas is considered to be completed.
If this condition is not met, gas supplies will be suspended. Further gas supplies are prohibited if the payment deadline for gas supplied under a contract has expired but the foreign buyer did not make the payment or made it in foreign currency, not in the full amount or not to the account at the authorized bank.
Russia has already suspended gas supplies to Poland, Bulgaria and Finland and the Netherlands because they refused to comply with the new payment system.