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    Austria's OMV Aims for Gassier Future

Summary

Austrian integrated company OMV is shifting its portfolio from oil to gas over the course of its seven-year strategy and developing business in a new core region.

by: William Powell

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Natural Gas News, Europe, Corporate, Mergers & Acquisitions, Exploration & Production, News By Country, Austria

Austria's OMV Aims for Gassier Future

Austrian integrated company OMV is shifting its portfolio from oil to gas over the course of its seven-year strategy and developing business in Australasia, it said March 13. It wants to increase production by the end of the period by 72%.

Announcing the new plan for 2025, CEO Rainer Seele said OMV's goal was to make oil and gas production and marketing "substantially more international." OMV will also build a strong gas market presence in Europe. Growth should be borne equally by upstream and downstream and will be achieved both organically and through acquisitions. In terms of the bottom line, OMV forecasts an increase in the clean current cost of supplies operating result to more than €5bn ($6.2bn) in 2025, compared with €3bn last year.

From 2015 to 2017, OMV’s upstream division slashed costs by 42%, increased production by 15% and achieved a ten-fold increase in its clean operating result.  Increases in production in Libya and Norway in particular, along with the acquisition of the Siberian gas field Yuzhno Russkoye, led to a new record production level in 2017 of 348,000 barrels of oil equivalent (boe)/day.

Reaching the target of 600,000 boe/d will be secured through acquisitions in cost-effective regions rich in reserves, whereby average production costs should not exceed $8/b, compared with today's $8.8/b. Substantial, long-term contributions are expected to come from the Russian fields Yuzhno Russkoye, Achimov IV and V (all Gazprom-operated), and separately from the Neptun gas field offshore Romania where its OMV Petrom business and US supermajor ExxonMobil are equal 50-50% partners. 

In addition to replacing the quantities produced – the goal here is an average three-year replacement rate of over 100% – the company will aim to double its secure reserves by 2025 to over 2bn boe, of which gas should account for over half.

The geographical focus of the growth strategy lies in the four existing core regions: CEE (Austria and Romania), North Sea, Russia, and Middle East & Africa. Alongside this, OMV plans to develop an additional core region in the form of Australasia. 

Between €1.3bn/yr and €1.7bn/yr have been earmarked for financing organic growth and ongoing operations until 2025. OMV plans to invest €300mn for the exploration and appraisal of potential resources, with an average of 15 to 20 exploration drillings/yr. The goal is to secure a higher quality portfolio that generates more cash and more than double its reserves.

The move away from coal will mean an increase in demand for natural gas – the more environmentally sound option – on the European market. Together with the sharp rise in demand for imports, this will lead to a greater market potential in the medium and longer term. OMV thereby aims to establish itself as a strong market player from northwest to southeast Europe. Gas sales should grow to more than 20bn m³/yr by 2025, compared with 10.3bn m³ last year; and OMV is aiming to secure a 10% share of the German market. OMV has earmarked about €5bn for acquisitions downstream by 2025.

Other plans include feeding additional equity gas from Norway and Romania into the European grid. The construction of Nord Stream 2 is of critical strategic importance for OMV, the company added, as it will secure consistent, long-term gas supplies to Europe in combination with the Central European Gas Hub in Baumgarten and the pipeline network of Gas Connect Austria. 

OMV's largest shareholder is an Austrian state holding company ÖBIB with 31.5%. The second largest is Abu Dhabi state-owned Mubadala (previously IPIC) with 24.9%. However most shares are freely floated on stock exchanges.