According to OMV boss Alfred Stern, it is still unclear how OMV will pay for Russian gas deliveries in the future. “There is relatively little clarity on the enforcement of sanctions for the new payment methods proposed by Gazprom – above all the payment of gas bills in rubles,” Stern said in an interview with the APA on Friday. “I cannot comment on this at this time as we are still in the process of working this out for ourselves.”
Under the existing contract with Gazprom, OMV is still paying in euros. The new payment modalities desired by Gazprom are currently being analyzed and the proposed solutions are being worked on “that are in accordance with the sanctions and the law”. When the new payment terms required by Gazprom will apply to OMV “is not entirely clear at the moment,” says Stern. “I would say this should happen in the course of May.”
Possibility that allows saving the face
Apparently, a possibility is currently being discussed in several countries that would allow Russia and the EU to save: gas customers in the EU could therefore pay in euros, the money would be immediately exchanged by Gazprombank for rubles and Gazprom as requested, get rubles.
According to Stern, reports that OMV wants to open a ruble account with Gazprombank in Switzerland are false. “I am not aware of this Swiss ruble account.” However, OMV has a commercial activity in Russia with its stake in the Yuzhno-Russkoye gas field. “We have an office there, and of course you have to pay the rent in rubles. There have been local business accounts in rubles for years.” However, these bills would not be used to pay for gas deliveries.
OMV has a 24.99% stake in the Yuzhno-Russkoye gas field in western Siberia. The gas produced there is sold “at the pump” – half of it on the Russian market, “unfortunately the prices there are not very attractive”. The other half will be sent to Germany. “The cash flow there was such that we received a dividend once a year in August”, in the order of 200 million euros. Due to existing sanctions, it will not be possible to transfer this payment from Russia to the parent company, at least next August. “We took losses on this gas field in the first quarter due to the change in situation and our expectation that there will be difficulties in getting the money out of the country.” This special effect was estimated in the quarterly report at around €1 billion.
Operate within the legal framework
The move away from Russian gas announced by several European countries is likely not going to be as easy as it is sometimes portrayed at the political level. On the one hand, there is a legal hurdle: “We have two contracts with Gazprom,” Stern said. “One is for Austria, which runs to 2040, and we have one for Germany, which runs to 2032.” The OMV chief stressed that the company would “act in accordance with sanctions and within the legal framework” at all times. “Of course, acting within the legal framework also means that I will fulfill my contractual obligations. I am the wrong contact person for how the legal framework and sanctions framework will develop in the future.”
Apart from the legal issue, from today’s point of view it is not possible to do without the supply of Russian gas in the short term for economic reasons, because these quantities of gas cannot be compensated with gas from other sources. “If we stop this delivery, there will be a bottleneck in the market, which I believe will also have huge consequences for the economy and the industry.”
Gas storage tanks are refilled
In March, gas storage tanks began to be refilled and are now in the process of defining payment modalities that comply with the sanctions. In addition, they are analyzing the flexibilization of the contracts for the sale of the quantities of self-produced gas. “In the medium term, we are also in the process of increasing LNG quantities through our LNG terminal in Rotterdam and bringing them to Europe. Of course, it all depends on having pipeline capacities.” With a specially deployed task force, they are in the process of minimizing risk and maintaining gas flows. “The chances of becoming independent of Russian gas overnight are extremely limited.”
high gas price
Mainly thanks to the currently very high gas price, OMV significantly increased its sales and operating profit in the first quarter of 2022. Revenues increased by 146% to 15.8 billion euros. Adjusted for inventory effects, CCS’ operating income before special items tripled from €870 million to €2.62 billion. CCS’s net income attributable to shareholders before special effects more than doubled from €424 million to €1.07 billion.