Germany’s Uniper terminates Russian gas supply deals

German state-owned energy firm Uniper has decided on Wednesday to terminate its long-term Russian gas supply contracts, officially ending its long-term gas supply relationship with Russia’s state-owned Gazprom.

According to a statement by Uniper, the decision was made possible after an arbitration tribunal on June 7 awarded the company the right to terminate the contracts and awarded it an amount of more than 13 billion euros ($13.96 billion) in damages for the gas volumes not supplied by Gazprom Export, a unit of Gazprom, since mid-2022.

“Although only limited gas volumes had been delivered since June 2022 and no gas volumes since the end of August 2022, the long-term gas supply contracts between the two companies were still legally in force and individual contracts would have continued to exist until the mid-2030s,” it said.

After Uniper suffered “substantial losses” due to the Russian gas supply restrictions, the company initiated arbitration proceedings against Gazprom Export at the end of 2022.

The option of dispute resolution via an arbitration tribunal was contractually agreed and had in the past in respect of other disputes been invoked repeatedly by both sides, Uniper said.

The tribunal, seated in Stockholm, ruled in accordance with Swiss law. The arbitration ruling is legally binding and final, it said.

LNG portfolio and pipeline gas

“From June 2022, Gazprom Export initially supplied less natural gas to Germany and then none, although such supplies to this day are not sanctioned by the EU,” Uniper said.

Uniper had to procure gas for its customers by other means, in some cases at “extremely high market prices, which at times led to additional costs for Uniper in the hundreds of millions of euros every day,” it said.

The company said it was only able to bear these additional costs with state support.

Uniper’s insolvency was averted with the stabilization agreement in December 2022 and the entry of the federal government as the main shareholder in Uniper.

Germany agreed to buy Fortum’s stake in gas and LNG importer, Uniper, to stabilize the firm and prevent an energy shortage.

Uniper and its partners developed Germany’s first FSRU-based LNG import facility in Wilhelmshaven.

German LNG terminal operator Deutsche Energy Terminal operates this facility and the Brunsbüttel terminal, as well as the Stade-FSRU terminal which is expected to receive its first cargo in the second half of this year, and the upcoming second Wilhelmshaven facility.

“Our termination of the contracts with Gazprom Export is the latest in a series of consistent decisions over the last three years,” Michael Lewis, CEO of Uniper said in the statement.

“During this time, Uniper has written off its share in the financing of the Nordstream 2 pipeline, its stake in the Russian subsidiary Unipro, and allowed its coal supply contracts with Russia to expire,” he said.

“Since then, Uniper has worked hard to diversify its gas business and is now well positioned with its global LNG portfolio and pipeline gas supplies from various regions,” Lewis said.

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