Austria Strives for Major Role in EU Gas Trade
Austria joining South Stream marks both the country and OMV's ambitions of becoming the major European natural gas trade hub and power through the combination of substantial gas flows into its territory.
The quantities discussed between Gazprom and OMV include approximately 32 bcm maximum flows into the Baumgarten gas hub on annual basis. Already the hub has a trading volume of 46 bcm per year and OMV's spokesperson, Robert Lechner, commented to Natural Gas Europe: "OMV’s aim is to secure energy supplies for Europe. With South Stream ending in Baumgarten we will contribute to this target," further adding that "It is too early to assess if the hub will grow stronger because of the recent South Stream agreement." Nevertheless it seems that the actual goal of the whole Austrian-Russian agreement is exactly that. The Central European Gas Hub was established in 2005 and right on the peak of gas consumption in EU countries.
In late 2009 it managed to enact the gas spot market and later on the futures market, thus acquiring a leading role in this kind of transaction for the whole of Europe. The driving forces behind it are OMV, the Vienna stock exchange and the Slovak gas transmission company. The first is a semi-state Austrian Corporation, in which the International Petroleum Investment Company (IPIC) of Abu Dhabi holds a 24.9% stake, which it considers selling to Gazprom. The second one is a stock market that belongs to the holding mother company CEE Stock Exchange Group (CEESEG) comprised of the Vienna, Budapest, Ljubljana and Prague markets. The group is the largest of its kind in Central, Eastern and Southeastern Europe and is essentially Austrian-owned. The third entity relating to the gas hub is owned by the Slovak government and a joint French-German consortium of GDF Suez and E.ON Ruhrgas. In short, Baumgarten brings together a 'Germanic' corporate energy force that has aligned the rest of the neighbouring countries together in an all-encompassing business linkage, with a small addition of a French presence.
Thus with German and French companies also participating in South Stream (EDF and Wintershall), a wider picture emerges, whereby the aim is not just for gas selling and trading but for establishing a strong bond between the Russian producers and the European consumers. In that sense Austria gains the role of the "hub" under which the relationships between the aforementioned is cemented. It is of great interest to note that despite the obvious negative stance of the EU's institutional bodies concerning South Stream in general as a project, Austria and OMV, managed to proceed with no great friction in comparison to Bulgaria's troubles. That point further gravitates towards the existence of a strong EU-centered corporate force that backs the recent culmination.
Robert Lechner explains the EU's stance on the project: “We are speaking about issues between Gazprom and the European Commission. Both parties are in a constructive dialog. Of course, it goes without saying that OMV complies with all European rules and legislation."
South Stream's envisaged quantities of 63 bcm, and are in most terms the flow that are planned to by-pass Ukraine and minimize its transit-country status. As it was mentioned previously, Austrian territory stands to absorb around 32 bcm per year, then in effect that country aims to replace Ukraine's role, especially if we take into account that the remaining 32 bcm will be readily imported and consumed by the rest of the prospective transit countries (Bulgaria, Serbia, Hungary, Slovenia and Italy).
Austria is a well-developed, technologically advanced and stable democracy, literally in the heart of the European continent and borders the major gas markets of Germany and Italy and right in between the trading axis of Black Sea-Adriatic Sea and Baltic Sea to Aegean Sea. Thus, the wider geo-economic scene emerges where the re-allocation of a fragile transit state such as Ukraine is being put in a far more secure environment and for which the local energy corporate Austrian world will also have plenty of opportunities to increase their stake and turnover in the gas sector.
This kind of design described previously has geopolitical consequences as well, and it is a product of alignment of influential and pan-European corporate and political interests at play, along with the obvious Russian goal to end its transit partnership with Ukraine.
Lastly, another seemingly irrelevant and concurrent development seems to further add to the hypothesis mentioned. Statoil's CEO Helge Lund at a joint Statoil/Wintershall event in Berlin on 24th June urged Germany to give emphasis on its natural gas as a base for the production of energy in the country. Today around 45% of Germany’s power is generated by burning coal, while gas only contributes 10%. Since Berlin has decided to curb significantly the CO2 emissions, Statoil states that “This clearly demonstrates that in order for Germany to reach its 40% reduction target in 2020, gas needs to increase its share in the energy mix, and the use of coal needs to be strongly reduced." A policy implemented such as the one suggested from Statoil will further cement both the Norwegian stake in gas imports in Europe and further boost the need for the establishment of the South Stream project, in which Wintershall owns a great stake. At the end gas producers feel content to offer "de-carbonization" in Europe, while expecting hefty returns for the long-turn.