Denmark’s Orsted warns of Russian gas supply halt after rejecting ruble payments

A view of Russian gas exporter Gazprom’s main office in Moscow June 3, 2014. REUTERS/Maxim Shemetov

COPENHAGEN, May 30 (Reuters) – Orsted (ORSTED.CO) warned on Monday that Russian company Gazprom Export may stop supplying gas to the Danish energy company because it refused to pay in roubles, but such a move would not would not immediately put Denmark’s gas supply at risk.

Russia’s ruble payment system has revealed flaws in the European Union’s united response to the Ukraine conflict, with some countries refusing to pay in rubles and others finding ways to comply. Read more

“Gazprom Export continues to demand that Orsted pay for gas deliveries in rubles,” Orsted said in a statement. “We have no legal obligation under the contract to do so, and we have repeatedly informed Gazprom Export that we will not.”

“There is a risk that Gazprom Export will stop supplying gas to Orsted. According to Orsted, this will be a breach of contract,” he added.

There is no gas pipeline directly connecting Russia to Denmark, which means that Moscow will not be able to directly stop the country’s supply.

The Danish Energy Agency said there would be no immediate consequences for Denmark’s supply if Russia were to halt gas sales to Orsted. The agency also said it had a contingency plan in the event of a gas shortage.

Orsted said he expected it would be possible to buy gas on the European market.

“We have prepared for this scenario to minimize the risks for Orsted’s gas customers, which are mainly large companies in Denmark and Sweden,” the company said.

It was unclear whether supplies will be cut after Orsted’s May 31 payment deadline.

Gazprom did not immediately respond to a request for comment from Reuters.

CUT SUPPLIES

Poland, Bulgaria and Finland refused to comply with Moscow’s request to change the mode of payment, and their gas supplies were subsequently cut off. Read more

German, Italian and French companies have said they will engage in the ruble system to maintain supply. Read more

Under the Russian ruble payment system, buyers must deposit euros or dollars into a Gazprombank account, where the bank converts them into rubles. Read more

Orsted has previously said his Gazprom contract accounts for the vast majority of Denmark’s gas consumption and around 1.5% of Russia’s total supplies to Europe, which last year amounted to around 155 billion cubic meters (bcm ).

Orsted sold its oil and gas assets in 2017 to focus on offshore wind power, but retains a long-term gas deal with Russia’s Gazprom that runs until 2030.

Reporting by Stine Jacobsen; Editing by Toby Chopra and Jane Merriman

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