HomeNewsRussian gas supply could stop to Austria before year-end

Russian gas supply could stop to Austria before year-end

11/14/2024

Russian gas supply to oil and gas company OMV in Austria is at risk of stopping before the end of the year due to an arbitration case against Gazprom, the company said.

Austria is one of the few European countries still dependent on Russian gas as much of the rest of the continent has reduced imports following Moscow's full-scale invasion of Ukraine in 2022.

On Wednesday, OMV said it had received an arbitral award of more than €230 MM ($243.06 MM) from the International Chamber of Commerce (ICC) due to irregular gas supplies to its unit in Germany from Gazprom which ended in September 2022.

The Nordstream gas pipeline from Russia to Germany was ruptured at that time due to explosions and has never been repaired.

Although the arbitration award is related to gas supplies to Austria's German unit, if Gazprom does not pay the award the court decided, OMV will have to offset the claim against invoices under its Austrian gas supply contract with Gazprom Export, which comes via a Ukrainian transit route, to compensate.

The Ukraine transit route is set to end by the end of the year anyway if a new contract between Ukraine's Naftogaz and Gazprom is not arranged. Kyiv has said repeatedly it will not extend the contract with Gazprom.

OMV's payments for gas to Austria are usually made to Gazprom every month towards the end of the month, meaning gas could stop this month or in December, it said.

"The next payment due date (Nov. 20) might mean that gas supplies via Ukraine will half from Nov. 21 onwards if Gazprom quits delivery," added Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.

Dutch wholesale gas prices hit their highest level in nearly a year on Thursday morning due to concerns that Russian gas supplies to Austria could be cut.

Supply. As of August, 82% of all Austria's gas imports came from Russia, according to Austrian energy ministry data. One of the reasons why large amounts are still flowing to Austria is that OMV has a supply contract with Gazprom until 2040.

This contract stipulates an annual delivery of about 6 Bm3y of gas and includes a take-or-pay clause, which obliges OMV to pay regardless of whether it takes the gas or not.

OMV has said it has been preparing for the eventual cut-off of Russian gas for a while and it can still deliver gas to its customers. It has secured transport capacity from Germany and Italy to Austria, as well as long-term contracts with other suppliers for gas. It can also get liquefied natural gas from the Netherlands.

"The current developments surrounding the OMV supply contract for Russian gas are to be taken seriously, but do not pose an immediate threat to our security of supply. We have always known that gas supplies from Russia are unsafe," said Leonore Gewessler, Austria's climate and energy minister, on X.

Other European gas companies have also brought cases against Gazprom for lower-than-contracted supplies or not fulfilling contract obligations, including CEZ, RWE, Uniper and ENI.

Gazprom has itself launched numerous litigations with European companies over gas supplies, to try and fight off at least €17 B ($17.86 B) worth of claims.

It has also tried to move arbitration to Russian courts, saying the European Union's sanctions bar access to European justice for Gazprom, while Western restrictions ban usage of Russian banking card and complicate the entry visas clearance process.

 

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