Russian Gas Supply to Austria at Risk of Halting Before Year-End

VIENNA/LONDON (Reuters) – The supply of Russian gas to Austria’s OMV oil and gas company faces the risk of a complete disruption by the end of the year due to an ongoing arbitration case against Gazprom, the company has warned.

Austria remains one of the few European countries still heavily reliant on Russian gas, with many other nations reducing imports after Russia’s invasion of Ukraine in 2022.

OMV announced on Wednesday that it had received an arbitral award of over 230 million euros ($243.06 million) from the International Chamber of Commerce (ICC). This was a result of irregular gas deliveries to its German unit by Gazprom, which ceased in September 2022 following the destruction of the Nordstream pipeline due to explosions.

While the arbitration decision pertains to supplies to OMV’s German unit, OMV could face the challenge of offsetting the award against its Austrian gas supply contract with Gazprom Export. If Gazprom fails to pay the award, it may jeopardize future gas deliveries via the Ukrainian transit route, which is set to end unless Ukraine and Gazprom sign a new contract. Ukraine has consistently stated it will not extend the deal.

OMV explained that gas supplies could be cut as early as November 21, following the next payment due on November 20. If Gazprom ceases deliveries, Austrian gas supplies may be halved from that date.

The uncertainty has driven Dutch wholesale gas prices to their highest in nearly a year, as concerns mount over potential disruptions in Russian gas to Austria.

As of August, Austria still relied on Russia for 82% of its gas imports. OMV’s long-term supply contract with Gazprom, valid until 2040, stipulates the delivery of about 6 billion cubic meters of gas annually, with a “take-or-pay” clause requiring OMV to pay for the gas regardless of whether it is received.

However, OMV has been preparing for the eventuality of a Russian gas cut-off. The company has secured alternative transport options from Germany and Italy, as well as long-term contracts with other suppliers, including liquefied natural gas from the Netherlands.

“Austria’s security of gas supply remains stable despite these developments, as we have always anticipated the risks of relying on Russian gas,” said Leonore Gewessler, Austria’s climate and energy minister, on X.

Other European companies, including CEZ, RWE, Uniper, and ENI, have also pursued legal action against Gazprom over unmet supply commitments, while Gazprom has filed its own claims against European firms, totaling up to 17 billion euros ($17.86 billion).