Austrian newspaper OMV reported that the company’s own losses if Russian gas transit through Ukraine were stopped would be limited. We are talking about tens of millions of euros. At the same time, the company notes that it will make money on its own gas if prices rise. Experts believe that OMV’s point of view has little importance, since the entire weight of the consequences may fall on end consumers.
In a report for the third quarter of 2024, the Austrian OMV reported that it was willing to interrupt the supply of Russian gas if transit through Ukraine was interrupted. Starting January 1, the five-year transportation contract between Gazprom and Naftogaz of Ukraine will end. And in kyiv they stated that they do not plan to extend the agreement itself, but that they are willing to welcome European companies if they need to receive gas. Western media reports on slow behind-the-scenes negotiations, which were confirmed in the Slovak SPP, but there is no concrete outcome and there may not be.
Last year, about 15 billion cubic meters were supplied to Europe through Ukraine: Italy, Austria, the Czech Republic and Slovakia. Supplies to Austria amount to 5.7 billion cubic meters per year and the proportion of Russian gas, depending on the month, can reach 90% of the country’s consumption. OMV is a long-time Gazprom customer. In 2018 we celebrate the 50th anniversary of Russian gas supplies to Austria.
“Over the past two and a half years, we have made significant progress in securing and diversifying our gas supply sources. “These efforts have successfully eliminated our dependence on Russian gas, representing an important milestone in improving energy security and the stability of our operations.” – said the president of the board of directors of OMV Alfredo Popa.
According to him, the company has already contracted a transport capacity through Germany and Italy of 3.8 billion cubic meters per year, and at the Dutch Gate terminal, 3.4 billion cubic meters. He added that the company’s gas production in Norway is 2.4 billion cubic meters per year and contracts with non-Russian companies are 1.9 billion cubic meters. The Austrian OMV seriously hopes to start production in 2027 at the Romanian Neptun Deep offshore field, whose capacity is estimated at 7.1 billion cubic meters per year.
“Currently OMV receives around 480 million cubic meters of gas from Gazprom monthly. In the event of a reduction in supply, we are ready to immediately switch to other sources and continue to fulfill all our obligations to customers,” said Alfred Stern.
“As we cover (lock in) Russian volumes for next month, we will need to buy the missing volumes on the spot market. If prices in European hubs increase in response to supply shortages, we may face some risk. However, this risk is limited to the short term – a maximum of one month – and, in our opinion, financially limited.” – continued the head of OMV.
He cited the forecast that if prices rise by 52 euros per thousand cubic meters after suspending transit, OMV’s losses will amount to 25 million euros.
“However, please note that in this scenario we will benefit from higher prices in European gas hubs, as we produce gas ourselves. From the current point of view, the overall impact of a possible interruption of Russian gas supplies on OMV is considered quite small.” – added Alfred Stern.
Deputy Director of the National Energy Security Fund (NESF) Alexey Grivach He considers that, from OMV’s point of view, talking about stopping traffic makes no sense.
“If they are allowed to pass on the likely price increases to consumers, they could certainly benefit in the short term from the transit crisis. But European consumers, European industry and the European energy system will definitely lose if traffic physically stops.” – pointed out the expert.
Over the past week, gas prices at the Dutch TTF hub were trading at $460 per thousand cubic meters. They are more than double the contributions before the crisis.
The deputy director of the FNEB points out that the cost of fuel in Europe in the event of a traffic stop will depend on many factors, including weather and consumption.
“Although part of the risk of a stop is already in prices, the 10% that OMV speaks of is the lower limit of potential growth,” – says Alexey Grivach.
The head of the Slovak SPP, which is also a major Gazprom customer, had previously said that alternative gas would be more expensive.
“We have diversification contracts with well-known companies, we have obtained transport capacity from the West and we store record volumes of gas in gas storage facilities in Slovakia. At the same time, security of supply comes at a price. “If gas transportation through Ukraine is interrupted, additional costs arise related to its supply, transportation to Slovakia and storage.” – said the general director of SPP Vojtech Ferenc. The Slovak company estimates additional costs of between 140 and 150 million euros.
