OMV Hoping for Commission Backing on Nord Stream II
Austria's integrated explorer and producer OMV Aktiengesellschaft (OMV) contends the extension of the Nord Stream pipeline, “Nord Stream 2,” will receive European Commission backing and that the project will play a key role in Europe's energy future.
In a live web conference on 12 August, OMV's senior leadership spoke of the company's participation in the pipeline project, which would deliver gas to the Baumgarten hub in Austria.
OMV is part of a consortium also consisting of Gazprom, Shell and E.ON. The two existing lines of the Nord Stream pipeline deliver 55 bcm of gas from Russia to Germany, traversing the floor of the Baltic Sea. The extension project would consist of two additional lines.
Naming security of supply as the key for Europe, OMV's newly appointed CEO, Rainer Seele, called Nord Stream a European project with “fascinating prospects” for OMV, to secure supplies of natural gas in all of Europe.
“For OMV,” he said, “this also means securing supply flows to the Central European gas hub, Baumgarten, which already handles 40 bcm/year – approximately one-third of the gas transported to Europe.”
The project, he added, will increase the capacity of the Baumgarten hub by 20%.
Mr. Seele said OMV is confident the project will receive the support of the European Commission despite the adverse political backdrop, adding that the success of an economic project will help restore trust in the political sphere.
While a journalist pointed out that the Third Energy Package strives for greater independence from some suppliers of gas, Mr. Seele noted that pipeline projects need investors.
“Gas from North Africa,” he said, “gives bigger headaches than from that supplied by Russia.”
While he conceded that new Nord Stream capacity might well reduce transit volumes through Ukraine, such flows are also in the interest of OMV.
According to Mr. Seele the challenge of the European gas market is one which can be exploited as an opportunity. Noting the continuing decline of consumption, he said that the dream of an era of climate friendly energy has turned into a nightmare, with gas-fired generation being shut down in favor of cheaper coal-fired power, for backing up renewables.
He commented: “It's foolish in terms of energy and climate policy. Natural gas is a natural partner to renewable energy – a vision shared by Greenpeace.” Replacing coal and meeting climate targets, however, will need help from policymakers, he said.
Regarding OMV's financial results for the first half of 2015, Mr. Seele said that the company will need to increase efficiencies in a challenging environment that included the low oil price and geopolitical tensions in Europe. According to him, OMV's downstream business is helping to bolster the weaker upstream.
For OMV, the challenge for the second half of the year will be achieving profitable growth and a
focus on natural gas will be part of the company's strategy towards a turnaround.
Despite factors like the immense overcapacity of hydrocarbons, he noted that the nuclear deal with Iran, if some obstacles are overcome, could yield attractive opportunities for the oil and gas industry, specifically for players like OMV.
He offered, “We have maintained good business relations with Iran over many years and our key priority is that OMV has the technological expertise which Iran now needs.” Billions in investment are needed there, he added, to modernize the oil industry.
Meanwhile, Yeman and Libya, because of security concerns, are no longer viable for OMV.
-Drew Leifheit