Austrian government to partly fund gas pipe upgrade

The Austrian government today confirmed plans to partly fund the WAG loop upgrade project, which will boost gas entry capacity from Germany by roughly a third.

The upgrade will increase entry capacity at Oberkappel by 27 TWh/yr, or around 30pc. An expansion of transport capacity from Germany to Austria is a "top priority" to enable diversification of gas supply and ensure that if needed, Austria can carry out a large share of its imports through this route, the government said.

The government will provide €70mn ($76mn) for the project "and more if necessary", finance minister Magnus Brunner said, emphasising that safe, affordable energy is "crucial for our budgets and the competitiveness of our location". Once the line is in use, operator Gas Connect Austria (GCA) will return the loan in order to refinance the measure. The funds will be taken from the federal budget only after a final investment decision (FID) has been taken.

The aim is to require less Russian gas in the short term and no longer need it in the medium term, while transitioning fully to renewable energies in the longer term, vice-chancellor Werner Kogler said. "Out of Russian gas, into renewables and thus into independence. That is our goal", energy minister Leonore Gewessler said.

GCA expects the entire project to cost around €200mn and be completed in 2027.

Operator response

GCA welcomed the government's funding pledge but noted that further steps are necessary before it can reach an FID.

The tariff system needs to be overhauled "in order to ensure the company's economic survival and ability to invest", GCA said, adding that the European Commission must also approve the state aid measure.

"We are confident that with the support of politicians, authorities and [Austrian energy regulator] E-Control, the next steps can move forward quickly in the following months," GCA said.

An FID "must be issued this year to trigger large-volume bookings", GCA said. But based on the existing tariff methodology, the construction and operation of the pipeline involves a "significant financial risk that a company like GCA cannot bear alone", the operator said. GCA has already carried out a feasibility study for the project and is working on the environmental impact assessment.

E-Control has proposed radical changes to the tariff methodology from 2025, aimed at adjusting to the significantly changed gas flow patterns over the past two years. GCA and fellow operator Tag support the changes, but almost all other market participants are critical.

By Brendan A'Hearn