Supply security and risk prevention: authorities should enforce their rights to inspect natural gas companies 

In the interest of supply security, natural gas companies are obliged to provide the competent authorities with data and to allow them to inspect documents, including gas supply contracts. However, Austria attached little importance to the state’s need for information with regard to risk prevention and securing the capacity to act in the event of a crisis. Neither the Federal Ministry for Climate Action nor E-Control fully enforced their rights to inspect gas supply contracts. This is one of the findings made by the ACA’s auditors in the report on “Natural Gas – Security of Supply“ („Erdgas – Versorgungssicherheit“) published today. Despite an opposing Climate and Energy Strategy, dependence on Russian natural gas was extended in 2018 and also increased in volume. The European Union (EU) has been stepping up cross-border energy infrastructure development since 2010. If this had not been the case, the 2022 crisis would not have been managed as well. The audited period essentially spanned the years from 2018 through 2022. The termination of the long-term supply contract by the OMV Aktiengesellschaft (OMV) took place after the audited period.

Long-term contracts shaped natural gas infrastructure 

In Austria, natural gas is mainly needed to generate heat: from process heat in the industrial sector to space heating and hot water. In the industrial sector, there is no other energy source that can fully replace natural gas in high-temperature processes in the short term.

In 1968, Austria was the first Western country – and OMV the first Western European company – to enter into an agreement on natural gas supply with the former Soviet Union. Long-term contracts shaped the gas sector and the natural gas infrastructure in Austria for decades. The high degree of dependence on one supplier was one of the factors that created barriers to change. In addition, Austria played an important role as a gas transit country. The war in Ukraine fundamentally changed the framework conditions. Supply interruptions resulting from the Russia-Ukraine gas disputes in 2006 and 2009 as well as the annexation of Crimea in 2014 repeatedly brought Austria’s high degree of dependence to the fore. In 2009, E-Control noted that such a dependence limited procurement options. In reports from 2005 to 2007, the Federal Ministry for European and International Affairs stated that energy policy seemed to be becoming an increasingly important instrument of Russian foreign policy. However, there was no sign of the ministries responsible for the energy sector or the Österreichische Beteiligungs AG (state-owned holding company), abbreviated as ÖBAG, which holds OMV shares in its portfolio, drawing any conclusions from the reports.

In 2018, at the same time as the Austrian Federal Government adopted the Climate and Energy Strategy (#mission2030), which provided for a reduction in the country’s dependence on energy imports, OMV extended its contract for Russian natural gas – which it terminated in December 2024 – until 2040 and increased the annual supply by one billion cubic metres. This sent conflicting signals.

The Federal Ministry for Climate Action and E-Control did not fully enforce their rights to inspection

The companies’ trade and business secrets must be treated confidentially. Nonetheless, natural gas companies are obliged to provide the ministry as the competent authority and/or E-Control as the regulatory authority with data and to allow them to inspect documents, including gas supply contracts. However, these obligations to report were not fully enforced; fines for violations were not imposed.

E-Control was unable to confirm to the ACA that all contracts and contract components were fully available to it. Parts of the long-term contract between OMV and Gazprom were extensively redacted. This long-term contract was not available to the Federal Ministry for Climate Action in the audited period. Particularly in view of the need for action in 2022, this would have been of overriding public interest.

In order to ensure appropriate responses and decisions in the event of a crisis, reliable aggregated data on gas demand, storage levels and supply is needed. The competent authorities in the member states are obliged to monitor supply security. However, due to incomplete and/or outdated data, neither Austria nor the EU were well prepared for a crisis. The ACA recommends enforcing and effectively exercising the authorities’ existing national and EU rights to information, access and inspection as regards natural gas companies.

State and socioeconomic interests should be adequately considered

Functioning energy markets as well as a sustainable and secure energy supply at affordable prices are of fundamental importance for the economy and society. Since 2000, a set of rules has been developed at the EU level that also includes safeguarding the security of natural gas supply as well as measures for risk assessment and crisis prevention. Austria adopted a negative attitude towards the exchange of information on gas supply under long-term contracts in the drafting process of the relevant regulations on the security of gas supply. In doing so, Austria referred to statements made by natural gas companies and business associations. The ACA recommended that the Federal Ministry for Climate Action not only adequately take into consideration the expertise and interests of natural gas companies and their associations but also state and socioeconomic interests when determining Austria’s negotiating position within the EU Working Party on Energy.

Security of gas supply: cooperation between active players is essential in the event of a crisis

The Federation – represented by the Federal Ministry of Finance – was the sole owner of ÖBAG, which, in turn, held 31.5 per cent of the shares in OMV, a publicly listed company. As a member of OMV’s supervisory board and via the shareholders’ meeting, ÖBAG, i.e. the Federal Ministry of Finance, was able to exercise a certain level of control. Against this backdrop, the ACA notes: until mid-2022, no approval from OMV’s supervisory board was required for the conclusion as well as the modification of long-term gas supply contracts. In this context, ÖBAG should have reviewed whether the catalogue of transactions subject to approval was adequate for the risks involved.

In ÖBAG’s eyes, its mandate – securing the business location – did not extend to the security of gas supply. Therefore, it would only act on behalf of the Federal Ministry of Finance if required. However, in the ACA’s opinion, maintaining energy supply is essential for Austria as a business location; it considers a mere ad hoc approach as insufficient.

In the crisis year of 2022, when assessing options for securing Austria’s gas supply, the Federal Ministry of Finance refrained from cooperating with the Federal Ministry for Climate Action competent for this matter, which was also working on a solution. Thus, the available expertise was not put to use.

Following Russia’s attack on Ukraine, the heads of state and government of the EU member states agreed “to end dependence on imports of gas, oil and coal from the Russian Federation as soon as possible”. For this purpose, the European Commission put forward the REPowerEU Plan on 18 May 2022. Since 2022, Austria’s dependence on Russian gas has decreased significantly. The ACA recommends pursuing the phase out from Russian gas as part of an overall strategy for transforming the energy system, not as an isolated goal. In doing so, decarbonization, security of supply and affordability for households, businesses and the industrial sector as well as with regard to public finance have to be kept in mind to an equal extent.