Natural gas to Austria Why the Russian supply freeze is not actually a freeze
For a week now, the Russian state-owned company Gazprom has no longer been supplying natural gas to the Austrian OMV. However, this is not an actual delivery stop.
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- Russia loudly announces a gas supply freeze to Austria, but this is not actually a freeze at all.
- Just one week later, a similar amount of Russian gas is arriving at the Austrian-Slovak border in Baumgarten as before.
- The only thing that has changed is how the gas is sold. However, a real supply stop is still on the cards, namely as of January 1, 2025, when the transit contract through Ukraine ends.
A similar amount of Russian gas will continue to arrive at the Austrian-Slovakian border in Baumgarten as before, as the Austrian news agency APA writes. The only thing that has changed is how the gas is sold. However, a real supply stop is still on the cards, namely as of January 1, 2025, when the transit contract through Ukraine ends.
Until now, most of the Russian gas flowing to Austria has gone to OMV under a contract that has been in place since 1968. However, after OMV announced that it would deduct compensation from the monthly gas bill, Gazprom stopped deliveries under this supply contract on November 16. Gazprom is now selling this gas on the stock exchange or to intermediaries - from where it will probably end up with OMV, as the latter still has to meet its supply obligations.
Observers see the fact that OMV is no longer receiving gas from Gazprom as the "beginning of the end" of the long-term supply contract, which was extended in 2018 until 2040. OMV itself does not wish to comment on the contract. In response to questions from APA, it said: "We cannot comment on our legal strategy and ongoing legal proceedings."
Possible withdrawal from the contract
However, it is an open secret that the company wants to get rid of the contract with Gazprom, which provides for a purchase obligation. OMV wants to produce its own gas from its Neptun Deep project in the Black Sea in Romania by 2027. In addition, following the Russian invasion of Ukraine, all EU states have agreed to phase out Russian gas by 2027.
The expiry of the Ukrainian transit contract is seen as an exit option. If Gazprom is no longer able to supply gas to Baumgarten, the Russians will no longer be able to fulfill the supply contract with OMV. As early as 2022, when Gazprom delivered less than OMV had ordered, there were voices speaking of a breach of contract. However, the contract is not publicly accessible. As a result, it is not possible to judge from the outside whether the current supply interruption also constitutes a breach of contract.
Wolfgang Urbantschitsch, head of the electricity and gas supplier E-Control, said this week that "the fate of the contract is in the hands of the contractual partners". And on the question of whether OMV is now rid of the Gazprom contract, E-Control expert Leo Lehr said on the Energy Agency podcast "Petajoule": "It looks like it. The contract will no longer be fulfilled." Lehr pointed out that contractual relationships have already been terminated in this way in Europe. "How this is to be resolved correctly in legal terms and how long this contract has to be in this non-fulfilled state, so to speak, in order to really be terminated is something that lawyers will probably be working on for the next few years," said Lehr.
Waiver is possible
Austria currently still obtains over 80 percent of its gas from Russia. However, OMV has secured alternative sources of supply and corresponding pipeline capacities. E-Control also emphasizes that Austria can now completely do without Russian gas. A substitute would then come to Austria from Norway and as liquefied natural gas (LNG) via Germany and Italy.
Austria is not the only country no longer dependent on Russia. In the EU, the share of Russian pipeline gas has fallen from around 50 percent at the beginning of 2021 to around 10 percent in 2024. Gas from Norway, Algeria and other countries as well as LNG have gained in importance. Speaking of LNG: Of the LNG share, which has risen to just under 40%, 10 to 15% is once again attributable to Russian LNG.
However, nervousness on the gas exchanges has recently increased again somewhat. Following the energy crisis in 2022, the price of gas on the TTF trading point, which sets the trend for Europe, fell to EUR 23 per megawatt hour (MWh) at the beginning of 2024, but has since risen again. In November alone, the price rose from 40 to just under 49 euros.
SDA
