Selgas
Clearly what is happening here is that due to the extremely low water flow the heater is allowing a very small amount of gas to weep through part of the main burner but is insufficient to light up from the pilot burner. The result is an annoying smell, but I do not believe it is a dangerous situation if this is the case. Get the tapware that is causing the problem upgraded or replaced to avoid this fault developing into something worse.
The water heater relies upon water flow to lift the diaphram and open the gas valve proportionally if the water flow is too low then no gas will flow – they were never designed to operate on any water flow of less than 4 litres of pure hot water per minute flowing through it.
