OMV Wins $243 Million Arbitral Award vs Gazprom over Undelivered Gas

Austrian oil and gas distributor OMV AG said it has won an arbitral award of damages against Russia’s Gazprom PJSC over failures to deliver contracted natural gas.

Amounting to EUR 230 million plus interest and costs, the award by the International Chamber of Commerce in favor of OMV Gas Marketing & Trading GmbH (OGMT) concerned “Gazprom Export’s irregular German gas supplies, which had eventually ended in September 2022”, state-backed OMV said in a statement.

“The company takes the necessary next steps to enforce the arbitral award with immediate effect”, it said, while acknowledging the action may sore business relations with Gazprom and result in the Russian state-owned gas giant halting supply.

Some three years before Russia invaded Ukraine, OMV signed an agreement extending its supply contract with Gazprom to 2040.

However, OMV assured it could still deliver all volumes contracted by its customers, saying it has diversified sources away from Russia.

“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”, OMV said in the online statement. “The off-setting amount is expected to increase OMV’s clean CCS operating result and operating cash flow.

“It is expected that there may be a deterioration of the contractual relationship under the Austrian supply contract of OGMT with Gazprom Export, including a potential halt of gas supply. In such case, small one-time hedging losses could occur, but will be clearly outweighed by the positive effects from the recovered damages”.

On the Austrian Virtual Trading Point, a halt in supply from Gazprom would mean a loss of 7,400 megawatt hours per hour or about five terawatt hours per month, according to OMV.

The company assured, “As part of OMV’s ongoing diversification strategy, it has continuously and successfully built up its gas supplies from non-Russian sources and additional pipeline capacities”.

“Its portfolio of gas encompasses several supply sources from Norway, as well as additional long-term LNG volumes”, it added. “OMV confirms that it can deliver the full contracted volumes of gas to its customers in case of a potential supply disruption by Gazprom Export. In addition, OMV’s gas storage in Austria is currently at over 90 percent”.

On June 5, 2018, OMV announced the extension of its contract with Gazprom, which was to expire 2028.

However, the Austrian national security strategy published this year confirmed the country’s commitment to the European Union aim of ending imports of Russian fossil fuels by 2027. In May 2022, a month after Russian forces barged into Ukraine, the 27-member bloc unveiled REPowerEU, a package of plans to phase out Russian hydrocarbons.

Earlier this year German gas and power utility Uniper SE also won a similar arbitration against Gazprom for non-delivery of gas, entitling Uniper to over EUR 13 billion ($13.73 billion) in damages and the termination of gas contracts.

“With the right of termination that we received in the arbitration ruling, we are ending the contracts with Gazprom Export”, Uniper chief executive Michael Lewis said in a company statement June 12 announcing the arbitration result.

In a statement May 21, OMV said a court ruling against Gazprom won by “a major European energy company” may require OMV as a buyer of Russian gas to withhold payments meant for Gazprom and redirect these amounts as damage payments under the award. It did not name Uniper.

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