Interview with the Chairman of the Executive Board
“Transformation through Innovation”
A conversation with Alfred Stern, Chairman of the Executive Board and CEO of OMV
Mr. Stern, we are conducting this interview in difficult and sorrowful times. As we speak, war is being waged in Ukraine.
This saddens me and our employees as well. The war in Ukraine is a tragic and threatening situation that means great suffering for many people. Our deepest sympathy goes out to all who are directly or indirectly victims of this war. We reject all forms of violence and war and are deeply convinced that freedom and wellbeing for people can only exist in peace.
OMV has had business relations with Russia for a long-standing period. How are you dealing with it now?
We have carefully considered our involvement in Russia and then made a clear decision that from now on Russia is no longer a core region for OMV. This means that we will no longer pursue any future investments in Russia. For this reason, we have also immediately ended all negotiations regarding a potential participation in blocks 4A/5A of the Achimov-Formation in the Urengoy gas and condensate field. Furthermore, we have initiated a strategic review of our existing stake in the Yuzhno Russkoye gas field in Western Siberia. Here we will consider all options, including a divestment or exit. In addition we recognize for this asset, as well as for our receivables from Nord Stream 2 AG, a value adjustment.
Mr. Stern, if we turn to the topic of further development and take a look into the future. The mission of companies like OMV has always been to supply energy. What is OMV’s future mission?
OMV will continue to develop and grow, and in doing so, pursue the clear goal of becoming a leader in sustainable fuels and chemicals as well as high-quality materials. That means that the OMV of tomorrow will be an innovative company that provides people with the circular resources needed for a better life in these modern times. And even further in the future, OMV will be a company with net-zero greenhouse gas emissions, a goal we aim to achieve by 2050 at the latest.
To restate the question, how long can OMV afford to keep pursuing the same business model?
Not a single day, if you look at it rationally. Even though we cannot radically change our business model immediately, we must act today and push it in the right direction. The new OMV Strategy 2030 is our first step toward more sustainability. We will implement this strategy quickly so that we can benefit optimally from the opportunities offered by the energy and sustainability transition. I am certain that this transformation of our Company will meet with positive feedback from shareholders, the capital market, customers, and, last but not least, our employees.
If you first look back and then into the future – what kind of OMV do you see?
Looking back, I see a successful company that has performed very well over many decades in the market and has also prepared very well for the future recently. Looking forward, I see an innovative company that is actively driving the shift toward more sustainability. I see a company that provides circular resources and products essential for our prosperity and a better life for all of us.
»The OMV of tomorrow will be an innovative company that provides people with the circular resources needed for a better life in these modern times.«
ALFRED STERN
Chairman of the Executive Board
What does “very well prepared for the future” mean specifically?
The past fiscal year underscores the financially and technologically strong position we have built. In 2021, we generated record earnings. This was thanks to first-rate performance by the Exploration & Production business, to stable earnings in Refining & Marketing, and especially to robust growth in Chemicals & Materials. The figures speak for themselves: We are taking the right approach. In addition, we consistently carried out the divestment program we announced in connection with the Borealis acquisition. We have successfully sold our shares in Gas Connect Austria, the E&P business in Kazakhstan, oil fields in Malaysia, and our 25-percent interest in the Wisting oil field in Norway. With this move and the support of our strong results, we were able to reduce our leverage to 22 percent in the past year.
And OMV’s technological strength?
At its core, it is our employees’ extensive knowledge of working with hydrocarbons as well as renewable raw materials and recyclates. We are able to find the best solutions along the entire value chain, a major asset for the future. And, to name just one innovation, OMV and Borealis were early adopters with the foresight to begin gaining experience in the mechanical and chemical recycling of plastics. This enabled us to establish a very strong jumping-off point for a future leadership position in the circular economy, which will play a key role going forward. The circular economy makes it possible to protect the environment and continue to enjoy the advantages of high-quality plastics at the same time. And that is precisely what will be needed. After all, plastics are essential, particularly during the energy transition. Think about heavy-duty cables, solar panels and wind turbines, and capacitors and semiconductors – none of these would be possible without high-quality plastics. It is exactly for this purpose that we offer tailored solutions as a global technological leader in this field.
How would you describe OMV in 2030 in one sentence? OMV is …
… a leader in innovative sustainable fuels, chemicals, and materials, heading toward net zero and leveraging the energy transition as a business opportunity for sustained growth. In the area of sustainable fuels and chemicals as well as high-quality materials and the circular economy in particular, we will be entering a new successful phase of our company history and acting as a role model for transformation in the industry.
OMV must also have a vision for 2040.
Yes, that is correct. By 2040, we hope to have established a sustainable, circular business model in the Group. And we are thinking beyond that as well. By 2050, we want to achieve net-zero greenhouse gas emissions. That also means that we are pursuing the goal of no longer producing oil and gas as an energy source by 2050.
How do you envision the road to OMV 2030?
Of course, this will mean changes in all of our businesses. In Exploration & Production, we have to incrementally move toward lower-carbon business activities. That means we will increase the share of natural gas in our portfolio as a transition fuel, but at the same time pursue sustainable energy solutions in which we can leverage our expertise and assets. These include geothermal energy as well as technologies for storing and utilizing CO2 and other gases.
OMV already has refineries that count among the most advanced and efficient in Europe. What direction will they take?
Our motto is “sustainable fuels.” In the Refining & Marketing business, we will first focus more intensely on using biogenic components in fuels and for chemical feedstock. We will also work on synthetic fuels and raw materials in the longer term. As of 2023, a pilot plant at our Schwechat refinery in Austria will use a catalyst we developed in-house to produce propanol from formerly unused glycerin, a waste product. We already supply wholesale customers with EcoMotion diesel, which reduces greenhouse gas emissions by 20 to 25 percent thanks to its renewable content. Along with Austrian Airlines, we will cut carbon emissions by more than 80 percent with sustainable jet fuel. These are all key steps on our path toward a more sustainable business model.
And in Chemicals & Materials?
After expanding the crackers at our Burghausen site in Germany, we will produce additional ethylene and propylene for the Bavarian Chemical Triangle starting in the third quarter of 2022. We are already successfully operating a new ISO C4 plant in Burghausen, in which we manufacture high-purity isobutene for the production of adhesives and vitamin C. Our propane dehydration plant in Kallo, Belgium, in which Borealis is investing around EUR 1 billion, will go online next year with a capacity of 750,000 tons.
We also see strong growth in Chemicals & Materials internationally in the future. This year, Borealis plans to work with TotalEnergies to increase the polyethylene capacity of our US joint venture Baystar to 1 million tons. In the United Arab Emirates, we were able to announce the successful commissioning of our fifth polypropylene plant recently. Borouge 4, a further project of our subsidiary Borealis and our partner ADNOC, involves investments of USD 6.2 billion in a polyolefin production complex. The facility has an annual capacity of 1.4 million tons. This plant aims to meet the growing demand for energy, infrastructure, and advanced packaging in the Middle East, Africa, and Asia by the end of 2025.
OMV’s future in many parts of the world will depend on chemicals. Is that realistic?
We have given this a lot of thought and taken this road intentionally. Everything we have seen so far confirms the correctness of this decision. This approach is a logical expansion of our value chain to include the opportunity to use our entire range of expertise to help shape a sustainable circular economy. We will expand geographically and add new, appealing products to our portfolio. The extent to which OMV is profiting from developments in the chemical market is demonstrated not least by our recent results.
The factory of the future will look different than a chemical factory does today. It will close the raw material loop and will therefore require a combination of various process technologies. Many of these will be a combination of what we are already doing today – in our refineries on the one hand and in our chemical production facilities on the other. For this reason, I am confident that we are well prepared for the future and will be able to utilize our expertise optimally to our advantage.
In technological terms, plastics recycling is in its infancy. However, the fight against plastic waste is likely to be increasingly fierce. How will you approach this?
As for the technology, we are at the forefront in mechanical as well as chemical recycling, including fields such as Design for Recycling. The early interest shown by OMV and Borealis in this topic gives us a clear advantage out of the blocks in various ways, such as access to plastic waste. It is also clear that we cannot let up. For this reason, we are making every effort to work with partners to develop these technologies and processes and making substantial investments to do so.
In terms of chemical recycling, OMV will convert 16,000 tons of plastic waste per year into valuable synthetic feedstock for the chemical industry at a ReOil® demo plant at the Schwechat refinery starting in 2023. The next step will kick off in 2026 with a commercially viable, full-scale industrial plant with a processing capacity of 200,000 tons. We already produce some 100,000 tons of circular materials and chemicals.
According to research, the circular plastics business will have a market potential of USD 40 to 60 billion by the middle of this decade. Will OMV capture a healthy portion of this market?
The circular economy is one of the main pillars of our future business model. At the start, it will only represent a small fraction of our total production volume. However, the actual success of innovations cannot be seen until the future, of course. I am optimistic that OMV can and will play a key role in the supply of raw materials if the market and general economic conditions develop as expected and we diligently pursue our goals.
What you are describing might well be the most far-reaching change in OMV’s history. How will you make this shift happen? And what does it mean for OMV’s employees?
Naturally, this will result in some changes and challenges for our employees but will also provide many opportunities for development. We cannot forget that OMV has always continued to develop in recent decades and has always been open to progress. We will create the framework necessary and implement the measures required so that everyone who wants to can also take advantage of these opportunities.
Let me again come back to our results from the past fiscal year. Our employees generated these absolute record-high earnings under never-before-seen conditions. The effects of the COVID-19 pandemic have put enormous strain on each and every one of us, but we nonetheless delivered this impressive performance. We can continue to achieve great things with this team in the future. I have already expressed my thanks for this on many occasions – let me do it here once again.
What factors will decide OMV’s success going forward?
Success always comes down to several factors. This certainly includes the Company’s financial strength. But the key factor is innovation. And for this, we need our employees, their creativity, and their openness to looking at change and seeing opportunities for new businesses.
Vienna, March 9, 2021
Alfred Stern m.p.