Vitol threatens gas shutdown in billion-dollar standoff with Germany | Rigzone

Commodity giant Vitol SA is threatening to halt gas supplies to a German state-controlled energy company in a legal stalemate that could cost the German firm around 1 billion euros.

SEFE Marketing & Trading Ltd., a former trading arm of Gazprom PJSC, has lost an urgent bid in a London court to stop trading company Vitol from cutting gas supplies as early as next week. Gas prices have jumped since the contract was signed, meaning the stakes for both parties are huge.

SEFE faces potential losses of around 1 billion euros ($987 million) if it has to replace lost gas at higher prices, two people familiar with the matter said.

“These contracts were entered into when market prices were significantly lower,” SEFE said in an emailed statement. The firm “strongly refutes the validity of the announced suspension and will continue to challenge it through all available channels”.

A Vitol spokesperson declined to comment.

The potential losses mean additional financial pressure on the German taxpayer, who has backed SEFE with an €11.8 billion line of credit through German state bank KfW Group. Vitol, one of the world’s largest commodities trading houses, made a record profit of $4.2 billion last year.

Germany backs commodity traders as war drives resource rush

A court order shows that the London-based SEFE unit asked the judge to stop Vitol from taking action which threatened to ’cause immediate and irreparably harmful consequences’ as early as Tuesday.

Vitol has argued it has the right to terminate or suspend deliveries due to SEFE’s change in ownership in April, according to two people familiar with the matter.

SEFE’s parent company, Securing Energy for Europe GmbH, was known as Gazprom Germania GmbH and was a branch of the Russian state energy empire. The company was released in April after European sanctions followed its invasion of Ukraine, prompting the German government to intervene to prevent a meltdown that would have sent financial waves through global energy markets and destabilized a large part of the German industrial region.

German regulator BNetzA, which oversees SEFE, did not comment on the figures and referred to ongoing legal proceedings. “It’s about security of supply in Europe,” said a spokeswoman.

After Russia cut off gas flows to Europe, Vitol demanded compensation from the German government for gas owed to it by Russia, which would have been funded by a proposed German consumer levy. The entire levy was halted due to political and administrative hurdles before any payment was made.

–With help from Jack Farchy, Archie Hunter, William Mathis, Petra Sorge and Josefine Fokuhl.

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