Portsmouth City Council plans to continue Gazprom gas contract

Gazprom currently supplies gas to all council-owned buildings across Portsmouth

A council is to make a U-turn on its decision to end a £5.5m contract with a formerly Russian-owned gas company.

Portsmouth City Council planned to use a break clause to end its deal with Gazprom in September in response to the war in Ukraine.

The move comes as the UK arm of the company has been taken over by the German energy regulator.

The authority's cabinet will be asked to abandon the decision to axe the contract on 21 June.

Gazprom is a Russian-owned company but its residuary, Gazprom Germania, which the UK arm is part of, is now controlled by Bundesnetzagentur - the German Federal Network Agency.

"No money from the contract is flowing back to the Russian state," a report by the council's head of energy services, Andrew Waggott, said.

He added: "The change of shareholder of Gazprom M&T and the control of Gazprom Germania by the German Federal Network Agency breaks the link between the contract and Russia," the Local Democracy Reporting Service reported.

'Inevitable cost increase'

Mr Waggott said: "Terminating the contract with Gazprom M&T will have an inevitable cost increase to the council which cannot be quantified, but it will result in a negative effect."

The report states Gazprom Germania, its parent group, is unable to buy Russian gas due to sanctions.

Several councils have said in recent weeks that they will no longer be able to end similar contracts, including Eden District Council, which said German control over the company was the reason for doing so.

The city council is able to use a break clause this month to end the three-year contract, which was only signed in October, at a cost of £57,000.

Leader Gerald Vernon-Jackson said a replacement contract would have cost about £1m a year more due to the rising cost of gas.

He said: "It was absolutely right that we sent the really clear message to the Russian government that we would not send them any money as a result of their invasion of Ukraine.

"But with the German government stepping in and that is no longer an issue and we are also able to save a substantial sum of money."

Gazprom currently supplies gas to all council-owned buildings across Portsmouth.