OMV breaks the contract with Gazprom: Russian gas goes to Austria without the company

OMV announced that it was breaking the last Austrian contract with Gazprom. The Russian company stopped deliveries for OMV on November 16, as it failed to make the monthly payment for gas and kept the funds for compensation awarded by the Stockholm arbitration. Experts do not rule out that the Austrian company was looking for an excuse to break the agreement in order not to pay possible penalties. Moreover, Russian gas continues to flow to Austria. However, past OMV.

OMV, which has been associated with Russia for 50 years of cooperation, announced the termination of a long-term contract for the supply of natural gas with Gazprom Export. The Austrian company announced numerous significant violations of contractual obligations by Gazprom Export. But they didn't specify which ones.

"This termination takes effect immediately. The subject contract was concluded in 2006 and provides for a period until 2040. Since November 16, 2024, Gazprom Export has suspended gas supplies to OMV. Earlier, OMV received about 16.9 million cubic meters per day, which corresponds to about 476 million cubic meters per month, on the Austrian-Slovak border,"OMV reports.

Alfred Stern, Chairman of the Management Board and Chief Executive Officer of the Austrian company, said that OMV is implementing a strategy of diversifying gas supply sources and additional pipeline capacities.: "Thanks to the successful work of our gas working group over the past three years, OMV is very well positioned to use our diversified portfolio of alternative gas sources, ensuring reliable supplies for our customers."

OMV reported that the company has its own production in Norway and Austria and has contracted additional supplies of both pipeline gas and LNG.

"It is obvious that Austria was looking for this opportunity (to break the contract) and used the first excuse to break the long-term contract. Given the deep crisis of the system of international and commercial law, this is not a very big event. But indicative. The sacredness of contractual obligations, which they talked about and which they taught others, turned out to be Filka's diploma," says Alexey Grivach, Deputy director of the National Energy Security Fund (NWF).

Due to the suspension of Russian gas supplies under a German contract - through Nord Stream — OMV filed with the Stockholm arbitration and continued the proceedings, despite the ban of the Russian court. Gazprom insisted that in the current situation they would not be able to protect their rights and interests in Europe.

In early November, OMV announced a victory in arbitration and awarded compensation of 230 million euros. Their company has withdrawn from the current November payment for the supply of Russian gas to Austria. After that, on November 16, Gazprom stopped deliveries.

Gazprom could not help but stop. The decree of the President of the Russian Federation prohibited gas supplies in the absence of payment. Flexibility appeared only after changes were made to the decree in early December as a reaction to US sanctions against Gazprombank," says Alexey Grivach.

He does not rule out that the Austrian company terminated the contract for the reason that it did not pay penalties.

"But in general, not to pay with fair arbitration, and then immediately terminate the contract under this pretext, it probably could not have passed," notes the deputy director of the FNEB.

OMV's irritation may also be exacerbated by the fact that Russian gas supplies to Austria continue and reached the level until November 16 this week — around 27 million cubic meters per day. The Slovak operator EUStream publishes data that on December 12, Austria plans to submit 26.6 million cubic meters, which are delivered to Slovakia via Ukraine.

ICIS and Reuters analysts reported that companies from neighboring countries, Gazprom's clients, sell Russian gas at the Austrian Baumgarten hub. Reuters sources said that Slovak SPP is now selling fuel to Austrian customers and did not rule out that OMV itself could buy back part of the volumes.