An extract from The Oil and Gas Law Review, 8th Edition

Introduction

With a land area of 83,879km² and a population of approximately 9 million, Austria is the 14th largest country in terms of land area and the 15th largest in terms of population in the European Union, constituting 1.7 per cent of the population of the European Union.

According to Statistik Austria, gross domestic natural gas consumption in 2017 was 325,899TJ, whereby domestic production was 43,665TJ and total gas imported amounted to 481,712TJ. Austria relies heavily on oil and gas imports, primarily from the Russian Federation.

Despite being a net importer of oil and gas, Austria has a respectable domestic upstream gas sector, with key fields in the Vienna Basin in Lower Austria and the Molasse Basin in Upper Austria and Salzburg.

The Austrian upstream sector is dominated by two companies, OMV (formerly Österreichische Mineralölverwaltung AG), a partly federal state-owned company responsible for approximately 88 per cent of crude oil and natural gas liquids produced, and Rohöl-Aufsuchungs AG (RAG), a privately owned company responsible for approximately 12 per cent of oil and 14.5 per cent of gas.

In addition to its upstream sector activities, Austria plays a central role in the European midstream natural gas sector, with the Central European Gas Hub at Baumgarten an der March being the main transit point for imported Russian gas to Western Europe.

Beyond domestic production, OMV is heavily involved in the international upstream sector, with operations in, inter alia, the North Sea, Tunisia, New Zealand, Romania and Yemen. OMV is the operator of Austria's only refinery in Schwechat. In addition to its upstream activities, RAG focuses on drilling technology and on large-scale gas storage, boasting a storage capacity of approximately 5.9bcm, 70 per cent of the Austrian annual gas demand.

This chapter will focus on Austrian domestic oil and gas exploration and production.

Legal and regulatory framework

Due to its size and administrative structure, Austrian energy legislation is fairly comprehensive with one central act regulating oil and gas exploration and production as well as general mining activities on the federal state level, with the enactment of certain minor pieces of legislation being delegated the relevant ministry or to the state governments.

The administrative role is again very centralised, with Section VI of the Federal Ministry for Sustainability and Tourism (the Ministry) responsible for the performance of a great deal of administrative duties in the upstream sector.

Given the greater development and importance of the mid- and downstream sectors in Austria, a greater amount of legislation has been enacted and further administrative bodies are involved in these sectors in comparison to the upstream sector.

i Domestic oil and gas legislation

The central legislative act for the exploration and production of oil and gas is the Mineral Resources Act 1999 (MRA), applicable to the entire federal state.

Due to its membership in the European Union, Austria has implemented a number of directives that apply to the upstream energy sector. The Oil and Gas Licencing Directive, which aims to ensure non-discriminate access to oil and gas exploration and production, was implemented in Austria under the Federal Procurement Act 2006.

The Stocks of Crude Oil and Petroleum Products Directive, intended to address the issue of European Union energy security, was implemented by the Oil Stockholding Act 2012, the Energy Steering Act 2012, the Oil Statistics Regulation 2011 and the Gas Statistics Regulation 2012.

On the basis of these key acts, a number of regulations have been issued detailing specific provisions, such as accident management and waste disposal, which shall be introduced below.

ii Regulation

As described above, the Ministry plays a very central role in the Austrian upstream sector. The Ministry derives its powers from the Mineral Resources Act, as well as other relevant legislation as expanded upon below. It is primarily responsible for the development of national oil and gas policy, and it authorises and manages the exploration and production on behalf of the federal state.

iii Treaties

As a Member State of the European Union, Austria is part of the internal market for gas, having implemented the European Third Energy Package, as well as the Energy Union, both of which aim to liberalise the European natural gas market. In addition to the above-mentioned European directives, the reporting provisions of the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) have direct effect on Austrian gas market participants, as detailed below.

Austria is a signatory to the Energy Charter Treaty, which aims to facilitate the trade of energy between the signatory states, which include major players such as the European Union and its Member States, the Russian Federation, Ukraine and Australia. The Energy Charter Treaty provides specifically for non-discriminatory trading rules for energy, reliable cross-border transit flows, the protection of direct foreign investment, the promotion of energy efficiency, and an international dispute resolution scheme between participating states and between investors and host states.

Austria has entered into several bilateral agreements on energy matters, including with both the Czech Republic and Slovakia regarding cooperation in oil and gas exploration.