Scenario Analysis

The Group faces exposure to physical climate risks and risks associated with the energy transition, encompassing stranded assets, decreased demand for fossil products, and regulatory risks, amidst significant uncertainty regarding the future energy mix and its alignment with the Paris Agreement’s ambitions over the next 30 years. Therefore, assumptions that represent management’s current best estimate of the range of expected future economic conditions, which may differ from the Company’s set targets, were used, including expectations about future worldwide decarbonization efforts and the transition of economies to net-zero emissions.

OMV utilizes two different scenarios, namely the base case and the ‘net-zero emissions by 2050’ case, which differ in their underlying expectations of the pace of future worldwide decarbonization and result in distinct assumptions for demand, prices, and margins of fossil commodities.

The base case is built on a scenario developed by the internal Market Intelligence department and assumes that all decarbonization pledges announced by governments around the world will be implemented in full and on time. In this scenario, the temperature increase by 2100 will be limited to 1.7°C with a probability of 50%. The underlying demand and price developments of fossil commodities are in line with the Announced Pledges Scenario (APS), which was modeled by the International Energy Agency (IEA). The base case is used for mid-term planning as well as for estimates relating to the measurement of various items in the Group financial statements, including impairment testing of non-financial assets and the measurement of provisions.

The ‘net-zero emissions by 2050’ case, which is based on a faster decarbonization path than the base case, is used for calculating sensitivities to recognize the uncertainty of the pace of the energy transition and to better understand the financial risk of the energy transition on the existing assets of OMV. The assumptions used in this case are in line with the Net Zero Emissions by 2050 (NZE) scenario modeled by the IEA. It shows a pathway for the global energy sector to achieve net-zero GHG emissions by 2050 and is compatible with limiting the temperature increase to 1.5°C.

Sensitivities, calculated based on the ‘net-zero emissions by 2050’ climate scenario using a simplified method consistent with a DCF model for impairment testing, indicate a risk of impairments of oil and gas assets, assessing the resilience against the energy transition risks.

The carrying amounts of the oil and gas assets with proved reserves (incl. E&P at-equity investments) would have to be decreased by EUR 4.4 bn and goodwill would decrease by EUR 0.3 bn. In addition, all oil and gas assets with unproved reserves would be abandoned with a pre-tax P&L impact of EUR 0.3 bn. Total post-tax impact on P&L would be EUR 3.6 bn.

As far as the C&M segment is concerned, management would not foresee negative effects on the overall demand of polyolefin solutions in the accelerated decarbonization scenario. Pricing of polyolefins is mainly driven by base chemical markets like naphtha, ethane, and propane. An accelerated change in the world’s energy landscape might lead to different price movements in those relevant base chemicals, temporarily affecting the profitability of some assets in the polyolefin value chain. Driven by the expected strong demand for polyolefin solutions, management does not foresee any substantial negative effects on the overall integrated value chain.

OMV plans to transform its European refineries so that they will stay competitive as the decarbonization of the fuels and chemical sector progresses. Crude oil distillation throughput will be decreased. The product mix will be adapted to reduce heating oil and diesel output while increasing the chemical yield. In parallel, a production portfolio of renewable fuels and sustainable chemical feedstocks will be developed. Taking into account these transformation plans, management does not foresee a significant risk that the existing refinery assets in Europe would not be recoverable in the ‘net-zero emissions by 2050’ scenario.

It is expected that declines in demand for fossil products caused by the energy transition will progress more slowly outside the European Union. The investment in ADNOC Refining is assumed to be resilient also in a Paris Agreement-aligned the energy transition scenario thanks to its access to markets in the Middle East and Asia.

For retail, cash flows of less than ten years were sufficient to demonstrate the recoverability of the carrying amounts of the currently existing assets. Consequently, there was no need to perform a calculation under the ‘net-zero emissions by 2050’ scenario.

For further information on base case and ‘net-zero emissions by 2050’ assumptions, please refer to the Effects of climate change and the energy transition section in the Annual Report, while risks from climate change and their management are detailed in the Risks and Opportunities section of the Sustainability Report and the Risk Management section of the Directors’ Report.