Gas deliveries from Russia to Austria remain stable, but Gazprom has stopped supplying OMV due to a contractual dispute, leading to sales on the stock market instead. The expiration of the Ukrainian transit agreement in 2025 could jeopardize future deliveries. Austria, relying on Russian gas for over 80% of its supply, is seeking alternatives from Norway and LNG. Meanwhile, EU dependence on Russian gas has sharply decreased, although recent gas price fluctuations have raised concerns.
Current Status of Russian Gas Deliveries to Austria
Gas shipments from Russia to Austria at the Austrian-Slovak border in Baumgarten remain consistent with previous levels. The primary change lies in the method of sale. A complete halt to gas supplies is still a possibility, especially as the transit agreement through Ukraine is set to expire on January 1, 2025.
Implications of Gazprom’s Supply Changes
Currently, most of the Russian gas reaching Austria is supplied to OMV under a long-standing contract dating back to 1968. However, following OMV’s announcement to deduct compensation from their monthly gas invoices, Gazprom halted deliveries under this agreement on November 16. Instead, Gazprom is now selling this gas on the stock market or to third-party intermediaries, from which it is likely to return to OMV, as they are obligated to meet their supply commitments.
Industry experts view the cessation of gas deliveries from Gazprom to OMV as a potential indicator of the ‘beginning of the end’ for their lengthy supply contract, which had been extended until 2040. OMV has refrained from commenting on this contract, stating, “We cannot discuss our legal strategy or ongoing litigations.” Nevertheless, it is widely acknowledged that OMV aims to terminate its agreement with Gazprom, which includes a take-or-pay clause. The company plans to produce its own gas from the Neptun Deep project in Romania by 2027, while all EU nations are working towards phasing out Russian gas by the same year in response to the conflict in Ukraine.
The expiration of the Ukrainian transit contract presents a potential exit strategy for OMV. If Gazprom fails to deliver gas to Baumgarten, it would jeopardize their ability to fulfill the supply contract with OMV. In 2022, Gazprom’s deliveries were already below OMV’s orders, raising concerns about a possible breach of contract. However, the details of this contract remain confidential, complicating any external assessment of the current situation.
Wolfgang Urbantschitsch, head of E-Control, remarked that the future of the contract rests with the involved parties. E-Control expert Leo Lehr suggested in the energy agency podcast ‘Petajoule’ that it appears OMV may be free from the Gazprom contract, as the terms are no longer being met. Lehr noted that similar contractual issues in Europe have been addressed in this manner, and the legal resolution of this situation will likely require the expertise of lawyers in the coming years.
Despite the ongoing situation, Austria continues to rely on Russia for over 80 percent of its gas. However, OMV has secured alternative sources and pipeline capacities to mitigate this dependency. E-Control has highlighted that Austria could potentially eliminate its reliance on Russian gas, with substitutes coming from Norway and liquefied natural gas (LNG) transported through Germany and Italy.
Austria is not alone in reducing its dependence on Russian gas. Within the EU, the reliance on Russian pipeline gas has dramatically decreased from approximately 50 percent at the start of 2021 to around 10 percent in 2024. The significance of gas from Norway, Algeria, and other nations, as well as LNG imports, has notably increased. Currently, of the nearly 40 percent LNG share, 10 to 15 percent still consists of Russian LNG.
However, recent fluctuations in gas prices have stirred concern. At the crucial European trading hub, TTF, gas prices fell to 23 euros per megawatt-hour (MWh) at the beginning of 2024 after the 2022 energy crisis. Yet, prices have since rebounded, with a notable increase from 40 to nearly 49 euros in November alone.