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- Impact of move for European gas market may be limited for now
- Gas continued to travel through Ukraine, Slovakia on Saturday
Gazprom PJSC is sending natural gas to Europe via Ukraine at normal levels even after cutting off one of its longest partners, Austria’s OMV AG.
The Austrian energy company confirmed its Gazprom deliveries were reduced to zero as scheduled at 6 a.m. on Saturday. The cut comes after OMV said on Wednesday it would stop payments to the Russian firm to recoup a €230 million ($242 million) arbitration reward.
The impact of the move for the European gas market may be limited at least for now as Russian flows into the region as a whole continue as normal. Gazprom supplies gas into Ukraine for transit, from where it travels to Slovakia for own consumption as well as further into Austria and other neighboring countries.
Gazprom confirmed transit flows via Ukraine at usual levels for Saturday. It declined to comment further.
Data from Slovakia’s gas transport operator Eustream show flows continue from Ukraine into Slovakia at the Velke Kapusany border point as normal on Saturday. Deliveries from Slovakia into Austria at Baumgarten also continue, with nominations for the day 17% lower than for Friday.
With OMV cut off, gas is being taken or moved by other buyers, according to people with direct knowledge of the situation.
Slovakia’s Slovensky Plynarensky Priemysel AS and Hungary’s MVM Zrt. might be responsible for continued flows within the region as they use upward tolerances in their contracts with Gazprom, said James Waddell, head of European gas and global LNG at Energy Aspects Ltd. in London.
“This may be what we’re seeing today but it will be hard to sustain that level of flow without initiating a new contractual agreement,” he said.
SPP wasn’t immediately available for comment. MVM declined to comment.
Russian gas flows to central Europe may adjust at the start of next week, given it takes about three days for the gas to move from Russia to Austria’s Baumgarten and the cut to OMV came abruptly, said Karel Hirman, former Slovak economy minister.
Leo Lehr, a competition regulator at Austria’s E-Control, confirmed in a statement on X that Russian gas for now is still arriving in Baumgarten.
“Russian gas will continue to end up in Austria without an import ban; that’s market dynamics,” he said. “However, an end to the OMV contract means a severance of the long-term commercial ties with Gazprom – which is ultimately much more important than where the individual gas actually comes from.”
Meanwhile, OMV said it can meet supply obligations through 2025 and beyond via alternative sources in the event that Russian deliveries under its long-term contract are halted. The company is producing from its own assets in Norway and buying more liquefied natural gas, Chief Executive Officer Alfred Stern said in an interview on Thursday.
Austria may accelerate the use of domestic inventories, which already dipped below levels seen in the previous two years at the same time of the year amid colder weather.
“For this winter gas supplies are ensured,” OMV’s former CEO, Gerhard Roiss, said in an interview on Austrian public radio ORF. “Storage is full and demand is significantly down.”
But gas prices may rise 20% or more in the short term, risking a new round of inflation, according to Roiss, who is urging Austria’s government to tap its 2bcm fuel reserve to dissuade market speculation. “The reserves are there and should be used to dampen prices,” he said.
— With assistance from Daniel Hornak, Elena Mazneva, and Veronika Gulyas – Source: Bloomberg
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