Arbitration win against Gazprom enables OMV to take €230M plus interest and costs home

Austria’s oil and gas player OMV has managed to get the upper hand in the arbitration case against Gazprom Export, a subsidiary of Russia’s gas giant Gazprom, over the latter’s reportedly irregular gas supplies to Germany. This enables the Austrian company to start taking steps to recover millions of euros in damages to balance the financial losses it suffered in the wake of the Russian player’s actions.

OMV’s arbitration proceedings against Gazprom Export under the rules of the International Chamber of Commerce (ICC) concluded with an award on November 13, 2024, concerning the Russian firm’s irregular German gas supplies, which eventually ended in September 2022.

The end of supplies came in the aftermath of the Ukraine crisis and the two major incidents, which entailed four gas leaks found on the Nord Stream 1 and 2 pipelines, two in Sweden’s exclusive economic zone (EEZ) and two in the Danish territory, laying bare the need to boost security in the region’s energy sector.

In July 2023, Germany, Sweden, and Denmark revealed in a letter to the UN Security Council their findings about the incidents, which indicated traces of subsea explosives in samples taken from a yacht that might have been used to transport the explosives that damaged the Nord Stream gas pipelines in the Baltic Sea.

OMV Gas Marketing & Trading (OGMT) initiated the request for arbitration in January 2023 to get back awarded damages amounting to €230 million alongside interest and costs, which is expected to contribute to balancing respective financial losses incurred in 2022. The company is undertaking the required action to enforce the newly received arbitral award with immediate effect.

“OGMT confirms off-setting its claims against invoices under the Austrian gas supply contract with Gazprom Export to obtain compensation for its awarded damage claims. The off-setting amount is expected to increase OMV’s clean CCS operating result and operating cash-flow,” underlined the firm.
 
While the possibility of a deterioration of the contractual relationship is anticipated under the Austrian supply contract with Gazprom Export, including a potential halt of gas supply, and despite small one-time hedging losses that could occur, OMV is adamant that these will be “clearly outweighed by the positive effects from the recovered damages.”
 
Therefore, the firm considers its win worth the potential hassle that may ensue, especially since it has continuously built up its gas supplies from non-Russian sources and additional pipeline capacities, as part of its ongoing diversification strategy. OMV’s gas portfolio now encompasses several supply sources from Norway, alongside additional long-term LNG volumes.

The firm has confirmed its ability to deliver the full contracted volumes of gas to its customers in case of potential supply disruption caused by Gazprom Export. According to the company, its gas storage in Austria is at over 90% while the potentially affected volume of gas for the Austrian Virtual Trading Point (VTP) is estimated at up to 7,400 MWh per hour, corresponding to approximately 5 TWh per month.

OMV is gradually pursuing the switch to low-carbon businesses to achieve net zero by 2050 at the latest. Last year, the Austrian firm achieved revenues of €39 billion, employing a workforce of around 20,600 worldwide. In June 2024, the company unveiled its new brand identity, highlighting sustainability and circularity embodying its net zero ambition.

To reach its decarbonization goal, OMV joined the Oil & Gas Methane Partnership (OGMP 2.0) of the United Nations Environment Programme (UNEP) which aims to improve the accuracy and transparency of methane emissions reporting.

The Austrian giant’s Norwegian subsidiary, OMV Norge, made a new gas discovery in August 2024 with a semi-submersible rig owned by Transocean.