Austrian energy firm OMV cancels contract with Russia’s Gazprom

The Austrian energy company OMV said on Wednesday that it has terminated its long-term gas supply contract with Russia’s Gazprom, effective immediately, due to “several fundamental breaches of contract.”

The agreement was originally set to expire in 2040.

Gazprom had halted gas supplies to OMV in mid-November, following a €230 million ($245 million) legal dispute between the two previous contractual partners, which a commercial court had ruled in favour of OMV.

Controversial clause in the gas supply contract

The contract between OMV and Gazprom, which was concluded in 2006, was initially celebrated by politicians but then came under fire due to its long-term nature and conditions.

The contract requires that the gas be paid for – even if it is not purchased. This scenario was contrary to the European Union’s intention to phase out Russian gas quickly, following Russia’s invasion of Ukraine in February 2022.

OMV, which supplies only industrial customers in Austria, ruled out the possibility of a supply bottleneck. “Today, we can fall back on a diversified portfolio of alternative gas sources and thus guarantee the security of supply for our customers,” said OMV chief executive Alfred Stern.

This includes gas from its own production in Norway and Austria, and from external gas producers and liquefied gas. In addition, the company’s gas storage facilities are currently around 85% full.