17. Property, plant, and equipment

Accounting policy

Property, plant, and equipment are recognized at costs of acquisition or construction (including costs of major inspection and general overhauls).

Borrowing costs directly attributable to the acquisition, construction, or production of qualified assets are capitalized until these assets are substantially ready for their intended use or sale. All other costs of borrowing are expensed in the period in which they are incurred.

The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset when a decommissioning provision is recognized (see Note 25 – Decommissioning and other provisions). Costs for replacing components are capitalized and the carrying values of the replaced parts are derecognized. Costs relating to minor maintenance and repairs are treated as expenses in the year in which they are incurred.

Property, plant, and equipment (except for oil and gas assets) are amortized or depreciated on a straight-line basis over the useful economic life.

Oil and gas assets with proved reserves are included in property, plant, and equipment. They are reclassified from intangible assets once the reserves are proved and commercial viability is established. Development expenditure on the construction, installation, or completion of infrastructure facilities such as platforms and pipelines and drilling development wells is capitalized within tangible assets.

Once production of oil and gas assets starts, depreciation commences. Capitalized exploration and development costs as well as auxiliary facilities are generally depreciated based on proved developed reserves by applying the unit-of-production method; only capitalized exploration rights and acquired reserves are amortized on the basis of total proved reserves, unless a different reserves basis is more adequate. Depreciation of economically successful exploration and production assets is reported as depreciation, amortization, impairment charges and write-ups.

Significant estimate: oil and gas reserves

The oil and gas reserves are estimated by the Group’s petroleum experts in accordance with industry standards and reassessed at least once per year. In addition, external reviews are performed regularly. During 2024, the reserves of the oil and gas assets in Tunisia and the Kurdistan Region of Iraq (KRI) up to December 31, 2023, were externally reviewed by DeGolyer and MacNaughton (D&M). The reserves of the other material oil and gas assets were externally reviewed the year before.

The results of the external reviews did not show significant deviations from the internal estimates, apart from a few exceptional cases. In the case of significant deviations, OMV performs further analysis, involving additional independent experts where necessary.

Oil and gas reserve estimates have a significant impact on the assessment of the recoverability of the carrying amounts of the Group’s oil and gas assets. Downward revisions of these estimates could lead to impairment of the asset’s carrying amount. In addition, changes to the estimates of oil and gas reserves prospectively impact the amount of amortization and depreciation.

Accounting policy

As a lessee, OMV recognizes lease liabilities and right-of-use assets for lease contracts according to IFRS 16. It applies the recognition exemption for short-term leases and leases in which the underlying asset is of low value and therefore does not recognize right-of-use assets and lease liabilities for such leases. Leases to explore for and use oil and natural gas, which comprise mainly land leases used for such activities, are not in the scope of IFRS 16. The rent for these contracts is recognized as expense on a straight-line basis over the lease term.

Non-lease components are separated from the lease components for the measurement of right-of-use assets and lease liabilities. Lease liabilities are recognized at the present value of fixed lease payments and lease payments that depend on an index or rate over the determined lease term with the applicable discount rate. Right-of-use assets are recognized at the value of the lease liability plus prepayments and initial direct costs and presented within property, plant and equipment.

Significant judgments: prolongation and termination options of lease contracts

OMV has a significant number of contracts in which it leases filling stations. Many of those contracts include prolongation and termination options. Prolongation options or periods after termination options are included in the lease term if it is reasonably certain that the lease will be prolonged or not terminated. When determining the lease term, the Group takes into account all relevant facts and circumstances that create an economic incentive for shortening or prolonging the lease term using the available options. When assessing the lease term of leases in filling stations for periods covered by prolongation or termination options, the assumption was applied that the lease term will not exceed 20 years.

Optional periods not taken into account in the measurement of the leases, exist mainly for E&P equipment in Romania, office buildings, a plot of land in Belgium and gas storage caverns in Germany. The prolongation option for the office buildings and the gas storage caverns can only be exercised in the distant future.