OMV Petrom Contributing to a Lower Carbon Future

OMV Petrom continues the transformation of activities and products, based on its Strategy 2030, to contribute to a lower carbon future. To support the implementation of this strategy, OMV Petrom is investing EUR 11 billion from 2022 until 2030 of which around 1 billion euro to develop the largest solar and wind power portfolio in Romania and 1 billion euro in the decarbonization of Romanian transportation through biofuels production and the largest electric charging network.

The strategic ambition remains unchanged – to lead the energy transition in South-East Europe, through 3 strategic pillars: Transition to low and zero carbon, Grow regional gas and Optimize traditional business.

All OMV Petrom’s strategic projects support Romania’s decarbonization agenda, as well as the company’s ambition to reach carbon neutral operations by 2050.

 

Strategy 2030 main objectives

The main objectives of OMV Petrom’s Strategy 2030 include the development of the largest natural gas resource in the EU; the development of the largest portfolio of new renewable energy projects in Romania; the largest investments for transportation decarbonization in Romania via the production of renewable fuels and the development of the most extensive charging network for electric vehicles.

“We remain committed to our transformation Strategy 2030 for a lower carbon future, while making some key adjustments: a more rapid build out in renewables, more ambitious target in e-mobility, and progressing with our Neptun Deep offshore gas project, on track for first gas in 2027. With rigorous capital discipline and solid financial performance, we aim to increase dividend distributions, being highly competitive versus our peers,” Christina Verchere, Chief Executive Officer OMV Petrom, pointed out.

 

Neptun Deep is at the heart of the Grow regional gas strategic pillar. According to Martin Urquhart, the Vice President for the Neptun Deep project, Neptun Deep is on track to deliver first gas in 2027. He highlighted some of the key milestones of the project.

From 2008 to 2015, the highly successful exploration and appraisal campaign on Domino and Pelican, which included two 3D seismic acquisition campaigns and the drilling of eight wells, delivered the positive data necessary to declare a joint development commercial.

In August 2022, OMV Petrom became operator, and in June last year the company took the final investment decision, with approval for the field development plan by the regulator received in August. Up until FID, total gross investment for the project was around 1.5 billion euro, of which 50 percent was OMV Petrom’s share.

The next steps are:

• The continued delivery of the permitting plan, following the regulatory processes, and aligned to the company execution strategy
• The first steel cut for the platform jacket in Italy in the third quarter of this year
• Commencement of construction works on the natural gas metering station in Tuzla in the fourth quarter
• Rig mobilization for the start of drilling next year
• The continuation of platform topsides fabrication in Indonesia, for completion in 2026
• Installation of the platform, pipeline and subsea infrastructure in the Black Sea through 2025 and 2026
• Finally, the hook up and commissioning activities leading to the first gas as planned in 2027.

 

Energy context

According to the IMF, Romanian GDP is forecast to grow at an average annual rate of more than 4 percent to 2030, well above the region and the EU average. Higher GDP growth leads to increasing energy demand.

Looking at power demand in Romania, OMV Petrom forecasts steady growth until 2030, supported by increasing electrification and mobility. For their products, especially with lower emissions, growth will continue to 2040.

After 2030, the company expects demand for gasoline and diesel to begin to drop, following the demand trends seen in developed countries. From their point of view, jet fuel consumption will continue to grow to 2040 with substituting jet fuel being the main challenge the transportation sector faces.

Post 2030, domestic natural gas consumption is forecast to reduce, as lower operating rates for gas-fired power plants are forecasted, while the share of renewable sources in the electricity mix increases. However, natural gas will continue to play a key role in the Romanian energy system through 2040, with increasing demand for hydrogen production and as a balancing source for renewables.

 

Transition to low and zero carbon

Low and zero carbon projects will account for about one third of the EUR 11 billion total investments, respectively EUR 3.7 billion between 2022-2030 and for one fifth of the Clean CCS EBIT1 in 2030. Of the 3.7 billion, more than one billion euro will go into innovation and high potential technologies.

 

Significant progress in less than 3 years

Since the launch of the Strategy 2030 in 2021, OMV Petrom has made significant progress.

• Renewable power: the current portfolio of solar and wind projects exceeds the initial target of more than 1 GW by 2030. The company now aims for ~2.5 GW of renewable power capacity by 2030, including partnerships. This translates into an annual net electrical output of ~4.7 TWh, of which 2.4 TWh net to OMV Petrom, to be reached by 2030.

Key figures by 2030: ~2.5 GW target capacity installed – 60% solar; 40% wind; ~4.7 TWh yearly electrical output; ~EUR 3bn full projects CAPEX; ~EUR 1bn OMV Petrom CAPEX; ~35% of households demand.

Main projects: CE Oltenia, 450 MW PV (50% interest); Teleorman, 710 MW PV (100% interest); Renovatio, 950 MW wind, 180 MW PV (50% interest); Isalnita, 85 MW PV (100% interest).

• Renewable fuels: The company recently announced the final investment decision for a new SAF/HVO plant at the Petrobrazi refinery, together with two green hydrogen production units, that will be used in the production of biofuels. Based on the 250 kt/year SAF/HVO capacity, OMV Petrom is to become the first major producer of renewable fuels in the region by 2028. Leveraging EU non-reimbursable funds, OMV Petrom accelerated its green hydrogen projects in Petrobrazi, with the aim to reach 100 MW capacity by 2030. In biofuels overall, the company adjusted the pace compared to its initial plan of reaching 600 thousand tons per year production by 2030, and now expect to produce 300 thousand tons per year, reflecting the technology maturity level and market developments.
• E-mobility: After acquiring Renovatio’s network, OMV Petrom is on track to reach its ambition of around 1,000 charging points by the end of the year, positioning itself as a major player in e-mobility. The company now aims to have more than 5,000 charging points by 2030 and thus to become the largest provider of e-mobility services in Romania.

 

Grow regional gas

Natural gas is expected to play a pivotal role as a transition fuel in the power mix in Romania, with CO2 emissions almost 60 percent lower than coal in power generation. In addition to this, the flexibility of gas-fired power plants supports the integration of renewable capacities into the power system. Neptun Deep, a 4bn euro project, is the largest gas development in the EU, and will also help reduce emissions intensity in E&P.

Natural gas is an important component in OMV Petrom’s strategy, due to its role in the energy transition and in the security of energy supply. OMV Petrom has over 40 years of experience as an operator in the Black Sea and believes that this region holds significant hydrocarbon potential. Currently, the company focuses on offshore activities in Romania and Bulgaria.

• Neptun Deep is contributing to Romania’s energy independence and economic growth. Neptun Deep development is important for securing sustainable long-term production growth and reduced production costs, while generating significant returns. The project has made significant progress, with the final investment decision taken in 2023. All major execution contracts have been awarded. The project is on track to deliver its first gas in 2027, within the total budget of up to EUR 4 billion.
• In the Han Asparuh block in Bulgaria, OMV Petrom became the operator of the license and is actively pursuing exploration activities.

Overall, the regional growth projects’ contribution to total Clean CCS EBIT is estimated at around one third in 2030, mainly from Neptun Deep.

 

Optimize traditional business

The company continues to capitalize on its integrated business model, with a focus on value over volume and operational excellence in all business segments. The share of cumulated CAPEX allocated to the traditional assets will decrease to around 45% by 2030 from nearly 100% in 2023, still with a solid contribution of more than 50% to Group’s Clean CCS EBIT in 2030.

• Exploration and Production: The strategy focuses on near-field opportunities close to existing infrastructure. The company plans to drill around 50 new wells and perform more than 400 workover jobs annually, aiming for an average annual investment of up to EUR 400 million, excluding Neptun Deep. Since 2021, the annual decline of production was reduced to around 6%, while the ambition for 2030 is to lower it below 5%, excluding Neptun Deep and before portfolio optimization. OMV Petrom aims to maximize the economic recovery of mature fields, and, with Neptun Deep volumes, to lower the production cost to around 8 USD/boe by 2030.
• Refining and Marketing: Petrobrazi refinery is well-prepared for high utilization rates and focused on efficiency and sustainability, while shifting production towards higher-value products and expanding the biofuels value chain. The integration with E&P business will remain strong throughout the decade, supported by equity crude production. In retail, with the 20% targeted increase of throughput per filling station and the doubling of the non-fuel business margin, the company envisages an increase of 20% in the profitability per filling station by 2030, all compared to 2020 levels.
• Gas and Power: Equity gas will continue to be complemented by origination activities to cover customer diversified needs, in an increasing gas demand environment. Neptun Deep gas will contribute to a total of approximately 60 TWh in gas sales by 2030. Meanwhile, the Brazi power plant will support Romania’s transition to green power, integrating with renewables for a baseload power profile. Around 30% of the total power sales will be green by the end of the decade, contributing to customers’ transition to cleaner energy.

“First, in Exploration and Production, where we are constantly working to mitigate the natural decline rate of over 10 percent per year, our objectives are to maximize the economic recovery of our mature fields and contain costs. To maximize the potential of our current integrated E&P assets, we plan to drill around 50 new wells and perform more than 400 workover jobs each year, on average. Until the end of the decade, our E&P business, excluding Neptun Deep, will see annual investment of up to 400 million euro, on average, with IRRs well above our 12 percent threshold,” noted Christina Verchere.

In the context of a high natural decline, since 2021 OMV Petrom has held it to around 6 percent and expect to further lower it to below 5 percent by 2030, excluding Neptun Deep production.

“Our portfolio, excluding Neptun Deep volumes, has a breakeven price of around 30 dollars per barrel of oil equivalent by 2030, at which it is expected to remain operating cash flow positive, which proves the resilience of our traditional portfolio. To manage costs, we will continue our optimization programs, reduce our footprint, and assess selective field divestment opportunities. We are also improving our contractor management and workover strategy, in order to drive efficiency improvements. Moreover, we continue to increase automation and modernize our facilities. Lowering methane intensity in E&P is a priority for us. We have reduced it by over 70 percent versus 2019 and we are targeting a reduction in methane intensity to below 0.2 percent by 2030,” Christina Verchere added.

 

Financial frame

The strategy is underpinned by 3 key elements of the financial frame, enabling the company’s compelling investment proposition:

• Rigorous capital discipline: Capital allocation within the strategy pillars ensures appropriate returns and payback periods, while considering strategic and operational risks and opportunities. OMV Petrom is accelerating annual CAPEX in 2024-2026 to EUR 1.7 billion, mainly for Neptun Deep and the low and zero carbon projects, while ensuring healthy double digits internal rates of return.
• Strong financial performance: The company aims for competitive operational profits across all strategic pillars and business segments, with a higher overall return on capital employed of around 15% and an EBIT target of more than EUR 1.5 billion, both for 2030.
• Attractive returns to shareholders: OMV Petrom will continue to offer competitive base dividends and discretionary special dividends. The company plans to distribute to shareholders total dividends (base and special) of around 50% of the operating cash flows on average over the strategy cycle, increased versus the 40% previously indicated in December 2021. Furthermore, the company provides an annual allocation guidance of 40-70% of operating cash flows to dividends.

 

GHG targets

OMV Petrom maintains its goal of achieving carbon neutrality from operations by 2050. The company aims to decrease the Scope 1-2 emissions and intensity of own operations by 30% and the Scope 1-3 emissions and intensity by 20% (both in 2030 compared to 2019). Fundamental to these are carbon capture and storage, especially for hard to abate industries.