OMV head says his country will continue to source most of its gas from Russia

Alfred Stern, CEO of the Austrian energy group OMV, has said that his company will continue to source the majority of its natural gas supplies from Russia in the winter of 2023/2024, even though it has signed contracts that would allow it to import enough to cover its needs from other suppliers.

In an interview with the Financial Times, Stern pointed out that the long-term take-or-pay contract that OMV signed with Russia’s Gazprom in 2018 was still valid. He stated that the Austrian company had no intention of seeking to exit this contract, which expires in 2040.

“As long as Gazprom will supply ... we will continue to take these quantities from Gazprom,” he declared.

OMV’s contract does not violate any rules or laws governing trade with Russia. The EU has imposed sanctions that severely limit the bloc’s member states from purchasing Russian crude oil and petroleum products, but it has not taken similar steps to restrict gas imports. Even so, Brussels has been pressing the EU’s member states, including Austria, to curtail imports of Russian gas.

Despite this lack of sanctions, OMV has drawn some criticism for its continued dealings with Gazprom. As such, the FT asked Stern whether he would welcome EU sanctions on Russian gas or see them as a means of improving his company’s reputation. In response, the CEO declined to express any policy preferences, saying that the matter was “for policymakers to decide.”

He also pointed out, though, that narrowing the pool of potential suppliers would inevitably affect conditions on European gas markets. OMV has a duty to its customers, he remarked, explaining that “eliminating certain sources will also drive price rises.”

He added: “There is an obligation we have as an industrial company to ensure that we use those sources as long as they are legally acceptable.”

OMV supplies about 30% of all the gas consumed in Austria, and it is heavily dependent on Russian imports. However, it has had to secure other sources of supply since the outbreak of war in Ukraine, owing to the fact that Gazprom has been sending less gas to Europe and adhering less steadily to its regular delivery schedules.

Stern acknowledged that Gazprom had become less reliable, telling the FT that the share of Russian gas in OMV’s total gas imports had fluctuated between 20% and 70% from one month to another in 2022. Because of these developments, he said, the Austrian company has worked to secure contracts for pipeline capacity that is sufficient to meet all of its needs. It has also arranged to source gas from Norway and import LNG via terminals in the Netherlands, he said.

Additionally, he pointed to OMV’s decision to allocate €2bn for investment in Neptun Deep, a gas field offshore Romania in the Black Sea. The Austrian firm has set up a 50:50 joint venture with Romania’s Romgaz and hopes to bring the field on stream in 2027, and this development will make Neptun Deep’s reserves of about 100bn cubic metres available for consumption in Europe, he said.

“This will make Romania the biggest natural gas producers in the EU and OMV one of the biggest producers of gas in Europe,” Stern told the FT. “I think that’s a significant contribution to the security of European supply.”