OMV signs 10-year LNG supply deal with BP as part of diversification efforts

OMV announced July 28 a new LNG supply agreement with BP as well as a significant gas discovery in Austria, as it highlighted ongoing efforts to diversify its supply sources over the coming years.

Under the deal, BP is to deliver up to 1 million mt/year of LNG from 2026 for 10 years, with cargoes expected to be received and regasified through the Gate LNG terminal in Rotterdam, where OMV holds regasification capacity.

"It is one of OMV's key priorities to drive forward our ongoing diversification of supply sources that encompasses gas from our own production and external sources from Norway, as well as additional LNG volumes," CEO Alfred Stern said during the company's Q2 results presentation on July 28.

The Austrian producer also announced that it had discovered the largest recoverable gas resource in the country for 40 years after conducting five months of drilling in Wittau, in the Gänserndorf region of Lower Austria. A preliminary evaluation indicates potential recoverable resources of approximately 48 TWh (28 million barrels of oil equivalent), the company said.

"This can be used to increase OMV's annual gas production in Austria by around 50%," Stern said.

The company said it was considering options for a fast-track development of the find in conjunction with the OMV-operated gas facility in Aderklaa, situated 10 km from the new discovery.

Russia no longer core

Stern highlighted on the call that the company was undertaking "major efforts" to provide sufficient volumes of non-Russian gas to its customers, although the company is set to remain a buyer of Russian gas under long-term contracts.

In Q2, OMV purchased on average 4.9 TWh per month (0.4 Bcm/month, or 4.4 million cu m/d) of Russian gas, it said in its results, without giving comparative data.

Earlier this month, Stern said OMV would continue to take Russian gas as long as it remained legal, reaffirming the company's obligation under its "take or pay" arrangement with Gazprom until 2040.

However, the company noted in its July 28 results statement uncertainty over the viability of future deliveries from Russia, with Stern telling the results call that Russia was no longer a "core region" for OMV and that the company would not make any further investments in the region.

"We decided to deconsolidate the Yuzhno Russkoye gas business from our P&L and made the necessary impairments," Stern said during the call.

"The current legal situation is in such a way that it's difficult to exit Russia, but we are continually exploring how we can proceed with our participation in the Yuzhno Russkoye gas field," he added.

OMV entered the Yuzhno Russkoye project in 2017, with the field adding some 100,000 boe/d to OMV's portfolio at the time.

Stern said that in the event of Russian curtailments, OMV would be able to use gas in storage to supply customers. Austrian gas sites were just under 87% full as of July 26, according to data from Gas Infrastructure Europe.

Additional supplies

OMV said that it had secured some 40 TWh of additional transport capacities to Austria in July, spanning the current gas year and out to 2026. This would largely be facilitated from transfer points located in Germany and Italy, with some 20 TWh of gas also to be supplied from the transfer points from 2026-2028.

Despite reporting an upturn in its Q2 oil and gas output, the Austrian company expects lower overall production this year compared to 2022, projecting a figure of 360,000 boe/d for the year, down from around 392,000 boe/d in 2022.

During the second quarter, OMV's total hydrocarbon production was 353,000 boe/d, up by around 8,000 boe/d compared to the same period a year ago. Of the total, some 163,000 boe/d was gas.

Production costs also spiked over the period, climbing by 20% to $9.9/boe, according to the report.

The company expects a downturn in average realized gas prices for 2023, indicated in the region of Eur30/MWh, adding that it expects average prices at the German THE gas hub in the region of Eur40/MWh.

Platts, part of S&P Global Commodity Insights, assessed the German THE month-ahead price at Eur28.87/MWh on July 27, sitting at a Eur0.42/MWh premium to the Dutch TTF.

It assessed the Austrian CEGH month-ahead equivalent at Eur30.55/MWh, marking a Eur2.1/MWh premium to the Dutch TTF.