Austria signs deal with Gazprom on South Stream

On June 24, Austria’s exploration firm OMV signed an agreement with Russia’s state-owned Gazprom on participation in the South Stream pipeline, against the recommendation by the European Commission (EC).

At an estimated cost of $40 billion, South Stream is set to bring Russian natural gas to Central Europe via the Black Sea and southeastern Europe. The EC insists that the project goes against the EU competition law, as third parties cannot access the pipeline.

Another key party to the project, Bulgaria, had earlier stopped the project until the EU anti-monopoly legislation requirements can be sorted out.

The deal came hours before Austrian President Heinz Fischer and Russian President Vladimir Putin met on the latter’s visit to Vienna

Later that week, Gazprom entered talks to buy a 24.9-percent stake in OMV, in which Abu Dhabi’s investment fund, the International Petroleum Investment Company (IPIC), has held a stake for 20 years.

“Talks were held but [the parties involved] have yet to decide on pricing,” according to a source credited by Reuters as being familiar with the talks.

Shares in OMV are held by Austrian state-run holding company Österreichische Industrieholding (OIAG) with 31.5 percent interest, IPIC with 24.9 percent and OMV with a 0.3-percent stake. The remaining 43.3 percent is floated on the Austrian Futures and Options Exchange.

Any shareholding changes in OMV are conducted by OIAG, which has said that it has seen no sign of IPIC wanting to sell its interest in OMV. However, new OIAG chairman Siegfried Wolf said he would not necessarily see any such signs until the point at which IPIC was ready to sell.

Buying into OMV would give Gazprom greater control over the construction and operations of the South Stream pipeline.