OMV Announces Gas Supply Contract with Russian Gazprom

OMV has terminated the long-term gas supply contract with Russian Gazprom with immediate effect. As a result, OMV no longer has any supply contracts with Gazprom and no business activities in Russia, according to a company announcement on Wednesday evening. OMV accuses Gazprom of "several fundamental breaches of contract". In particular, Gazprom stopped gas supplies to OMV on November 16.

OMV Terminates Supply Contract with Gazprom

OMV CEO Alfred Stern emphasized in the announcement that his company now obtains gas from its own gas production in Norway and Austria, from external gas producers, and as liquefied natural gas (LNG). The gas storage facilities of OMV in Austria are currently about 85 percent full. "OMV is capable of fulfilling all customer contracts from alternative gas sources," Stern stressed. The supply quantities have been "diversified through alternative gas sources" and have also only brought small margins "in the single-digit million range".

OMV's Risk Potential Has Decreased

"The termination of the Austrian supply contract with Gazprom Export significantly reduces the potential risk profile of OMV Gas Marketing & Trading (OGMT)", says Stern. OMV was under massive pressure to reduce or stop its business with Russia, but could not do so because of the long-term obligations from the gas supply contract. Because the contract stipulated an obligation to pay for delivered gas even if it was not needed.

The terminated contract originated from 2006 and was supposed to run until 2040. It was celebrated by politicians at the time of its conclusion, but then came under criticism due to its long-term nature and conditions. Before the supply stop by the Russian suppliers, OMV received about 7,400 MWh per hour at the Austrian-Slovak border, according to OMV. This corresponded to approximately 5 TWh per month. For comparison: Austria's gas consumption in 2023 was about 75 TWh, before the Ukraine war it was almost 100 TWh.

Arbitration as the Trigger of Developments

The Gazprom delivery stop did not come out of the blue. The trigger for the developments was an arbitration ruling that awarded OMV damages of 230 million euros against Gazprom. OMV then deducted this amount from its payments to Gazprom. Gazprom took this as a reason to stop its deliveries to OMV. The whole developments are also to be seen in the context that as of January 1, 2025, the end for Russian gas deliveries via pipeline is imminent anyway, as Ukraine does not want to extend the contract for deliveries across its territory. Whether no gas will actually flow from January 1 is still open.

Nehammer: "Austria Will Not Be Blackmailed"

"Russia wanted to use energy as a weapon against us - it didn't work. Gazprom did not adhere to the contracts, so OMV is terminating the contract, which was supposed to run until 2040, immediately. Our energy supply is secured because we are well prepared. Austria will not be blackmailed," writes Chancellor Karl Nehammer (ÖVP) in an initial reaction on Wednesday evening.

For Climate Minister Leonore Gewessler (Greens), the termination of the long-term Gazprom contract by OMV is a "necessary step towards energy independence of our country". This ends Austria's decades-long dependence on Russian energy. "This decision poses no danger to the security of supply in Austria," Gewessler assures. "Austria is no longer blackmailable with Russian gas deliveries". However, for the gas suppliers, the following now applies: "The customers must not bear the additional costs for this foreseeable change".

(APA/Red)

This article has been automatically translated, read the original article here.