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Coronavirus impact | Energy firms receive force majeure notices from customers: Report

April 01
14:56 2020

Energy firms are receiving force majeure notices from several customers as demand takes a hit during the coronavirus lockdown, according to a report by The Economic Times.

Many factories are closed due to the 21-day nationwide lockdown, which has hurt demand for fuel and electricity.

“Force Majeure” is the legal term for a clause typically invoked when a party to a contract seeks exemption from obligations due to uncontrollable or unforeseeable circumstances.

Several small factories have sent force majeure notices to city gas distributors, who have consequently sent similar intimations to gas marketers such as GAIL, Indian Oil and GSPC.

Moneycontrol could not independently verify the story.

GAIL has received such communication from its customers in the fertilizer, power and refinery sectors, The Economic Times reported.

GAIL, too, has sent similar notices to its suppliers, including ONGC, Petronet LNG, and Russia’s Gazprom, the report added.

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“It’s a chain reaction. If the end consumer loses appetite, the effect will go right up to the producer. This is an extraordinary time, and the problem is so widespread that it’s hard for anybody in the middle to absorb the shock,” a GAIL executive told the paper.

India’s largest gas importer Petronet LNG has served a force majeure notice on Qatargas, according to a Reuters report.

ONGC had to cut its gas output by 18 percent after seeing lower demand from GAIL, GSPC and other smaller buyers.

“We have selectively shut wells and will be able to reopen them quickly when demand picks up after the lockdown,” ONGC chairman Shashi Shanker said, as quoted by the publication.

Consumer demand for electricity has lowered 30 percent, the report added.

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