The Unexpected Silver Lining: How an EU Country Found a Massive Gas Reserve After Russia’s Sudden Supply Cut

According to EADaily, Austrian oil and gas group OMV is launching a campaign to develop a major field in the Black Sea region of Romania after Russia cut off its gas supply on November 16.

The Transocean Barents semi-submersible drilling rig, contracted by OMV, has arrived in Constanta, Romania. Starting in January 2025, the rig will commence drilling operations at Deepwater Neptune, with estimated reserves of around 100 billion cubic meters of gas.

“The arrival of the rig marks a significant step in the development of the first deepwater offshore gas project in Romania, together with our partner Romgaz,” said Cristina Vercere, CEO of OMV’s Romanian subsidiary, OMV Petrom.

The Deepwater Neptune field is owned by OMV and Romgaz, Romania’s state-owned company. A deepwater discovery was made here in 2011, with plans to commence production in the late 2020s. However, Romania’s parliament tightened tax laws for oil and gas companies, leading to OMV indefinitely postponing the investment decision.

From 2022 to 2023, tax policies changed. OMV plans to invest 4 billion euros with Romgaz in this field and expects to receive the first gas in 2027. Annual production at the new field is estimated at around 3 billion cubic meters. The development will be the first major field to come online in decades in Europe.

OMV, 31.5% owned by the Austrian state, was one of Gazprom’s largest customers in Europe. Annual deliveries amounted to 5.7 billion cubic meters per year under a contract with Austria. However, in 2022, Gazprom halted gas transportation, leading OMV to file a case with the Stockholm Arbitration Court.

In November this year, the arbitration court ruled in favor of OMW, awarding it 230 million euros in compensation. OMV offset the compensation against the payment for gas delivered in October, leading to Gazprom halting deliveries on November 16, despite the contract being valid until 2040.

Gazprom has operated several large gas storage facilities in Austria, which has been considered its “stronghold” in Central Europe for the past two decades. As a result, Austria has saved billions of dollars by purchasing cheap Russian gas.

Despite Gazprom cutting supplies to OMV, Austria continues to import Russian gas via Slovakia. The Russian giant has been selling additional gas to SPP, Slovakia’s gas company, since it stopped exporting to OMV. SPP then resells it to buyers in Austria.

Austrian Energy Minister Leonore Gewessler stated that OMV would decide whether to terminate the contract with Gazprom. She said, “My task and that of the federal government is to create the regulatory frameworks that will enable us to end this contract.”

References: EADaily, Reuters