OMV Shrugs off South Stream Cancellation

Austrian energy group OMV's chief executive played down on Tuesday the importance of Russia's apparent cancelling of the South Stream gas pipeline project, saying investments in the Black Sea played a much bigger role for the company.

Extending South Stream to Austria as agreed this year would have cost OMV around 100 million euros ($125 million) over three years, compared with the $1 billion it will invest with partner Exxon Mobil (XOM) to explore a Romanian project in the Black Sea that may produce its first gas by 2020, Gerhard Roiss said.

Russia surprisingly announced on Monday it had scrapped the $40 billion project to supply gas to Europe without crossing Ukraine.

OMV, positioning itself as a committed partner to Russia's Gazprom, in June signed a deal to extend the pipeline from southeastern Europe to Austria.

"We have not yet had any contact with Gazprom regarding the statement from yesterday," Roiss told reporters.

Asked what would happen to the deal now, Roiss sighed and said OMV would have been involved in building only a small part of the pipeline.

"There is no way around Russian gas in Europe," he said. "I'm not saying (South Stream) is finished, we had no consultation with Gazprom so far, let's talk and see."

Austria's government thinks South Stream is dead but needs to get more details and official confirmation, Economy Minister Reinhold Mitterlehner had earlier told reporters, playing down the potential impact on Austria.

With South Stream now all but off the table, OMV is suffering another setback to its gas business, hurt by a weak market, after the Nabucco pipeline project to bring Azeri gas to Western Europe was never realised. (1 US dollar = 0.8034 euro) (Reporting by Shadia Nasralla