In brief: natural gas production in Austria

Regulation of natural gas production

What is the ownership and organisational structure for production of natural gas (other than LNG)? How does the government derive value from natural gas production?

The exploration and production of natural gas in Austria is undertaken by two companies. The first is OMV Austria Exploration & Production GmbH, which is indirectly owned by OMV AG. The shares of OMV AG itself are quoted on the Austrian stock exchange with two major shareholders (about 31.5 per cent are held by ÖBAG, the Austrian state-owned holding company, and about 25 per cent by MPPH, the state-owned holding company of Abu Dhabi). The second company is RAG Austria AG, an independent company.

Entities producing natural gas must pay royalties to the federal government, and earnings are subject to income or corporate tax.

Describe the statutory and regulatory framework and any relevant authorisations applicable to natural gas exploration and production.

Under the Mineral Resources Act, ownership of hydrocarbons not yet produced lies with the Republic of Austria. The Republic of Austria, represented by the Ministry of Finance (BMF), may conclude exploration, production and storage agreements with entities that have the technical and financial expertise for that kind of mining business, thereby transferring the right to the hydrocarbons produced in a given area to the entity. In exchange for the right, the entity must commit itself to a certain amount of agreed exploration activity, and the payment of lease rentals and royalties in the case of production. In addition to this contract under civil law, the entity undertaking these activities must obtain certain permits in advance for, among others, operation and construction from the mining authority (the BMF).

The BMF determines the regulatory policies governing the production of natural gas in accordance with and within the framework of the Mineral Resources Act. There is no separate regulatory agency established for the activities governed by the Mineral Resources Act, including the mining aspects of exploration for, and production and underground storage of, natural gas.

If the exploration of natural gas exceeds 500,000 cubic metres per day (m³/d) (reduced thresholds of 250,000 m³/d may apply to exploration fields located in specific ‘protected areas’), an environmental impact assessment is required under the Environment Impact Act 2000 (UVP-G 2000). The competent authority for an environmental impact assessment is the respective provincial government.

Administrative decisions of the BMF may only be challenged before the Austrian Supreme Administrative Court or the Constitutional Court of Austria, or both. A decision regarding an environmental impact assessment issued by the provincial government can be appealed before the Federal Administrative Court. There is no difference between the unconventional and conventional sectors of natural gas exploration in Austria.

Are there different rules for, or any restrictions on, unconventional natural gas production (including fracking)?

No special legal framework for unconventional natural gas production (including fracking) has been introduced in Austria.

Are participants required to provide security or any guarantees to be issued with a licence to explore for or to store gas?

The Mineral Resources Act only provides that the respective applicant must fulfil the technical and financial requirements to establish and operate the respective mining undertaking. Under the exploration, production and storage agreement to be concluded, the BMF may require the provision of securities or guarantees depending on the financial standing of the contract partner.