OMV, Gazprom Drop Assets Swap: Update

(Adds comments from OMV, Gazprom and background)

Austrian OMV and Russian Gazprom have dropped their asset swap in favour of a simple sale of Russian upstream assets, in a deal the two companies signed late October 3. The need to start work on the Russian assets was too urgent to be delayed further, OMV told NGW. Norway has expressed objections to allowing Gazprom into its upstream.

Gazprom CEO Alexei Miller said: “We are opening up new horizons for our 50-year strategic co-operation with OMV. Our reliable Austrian partner is joining another crucial project: the development of the Achimov formations in the Urengoi field. We will sign the final document in 2019, and the development of Blocks 4A and 5A is planned until 2069. This means that we have another 50 years of fruitful work ahead of us.” 

His counterpart Rainer Seele said OMV "was upgrading its strategic partnership with Gazprom along the entire value chain from production in Russia to the supply of European gas markets.” 

OMV is one of the five European companies each financing a tenth of the cost of Nord Stream 2 pipeline, Gazprom providing the other half.

The October 3 deal covers OMV's potential acquisition of a 24.98% interest in Achimov IV and V phase development of the Urengoi gas and condensate field, "for a purchase price to be negotiated in good faith," OMV said October 3.

OMV said this agreement replaces the one concluded between OMV and Gazprom on December 14, 2016 which provided for a potential asset swap of the aforementioned interest against a 38.5% participation of Gazprom in OMV Norway.

The execution and implementation of the potential transaction is, amongst others, subject to agreement with Gazprom on the final transaction documents and regulatory and corporate approvals at a later stage. The signing of the final transaction documents is expected early next year.

The Norwegian government told Reuters in May this year that: “We have said we are not happy for this deal because we want to have diversified supplies for gas to Europe.... That is important for the Europeans, to know that they have Norway as a stable producer. With Gazprom on the shelf, some people might question that.” However, as of that date, Norway had not received any application from OMV, the spokesman said.

OMV told NGW October 4 that it and Gazprom had been discussing the deal for a long time. "Both companies consider the development of Blocks 4A and 5A in the Achimov formations important. Both parties agreed on the transaction in this way to be able to work as partner in this important project as soon as possible," it said, not directly addressing the question of Norway. Gazprom has yet to say what prompted the change of plan.

The Norwegian petroleum ministry told NGW it had taken note of OMV's statement but had no comment to make. The somewhat gloomy mood of the picture that accompanied the statement perhaps tells its own story.

Russia's president Vladimir Putin looks on as the CEOs of OMV (Rainer Seele, left) and Gazprom (Alexei Miller) sign the basic agreement.

(Source: OMV)