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    Hungary's MOL Adopts Low-Carbon Strategy


Avoiding volumetric targets for upstream, the company will strengthen its profits while improving its sustainability.

by: William Powell

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Hungary's MOL Adopts Low-Carbon Strategy

Hungarian energy company MOL has updated its 2016 strategy for 2030 and beyond with a focus on decarbonisation and sustainability but also profits, it said February 24.

It conceded that although it has "taken important strategic steps in the right direction over the past five years," it is aware of the "unprecedented pace of changes around us recently, including rapid progress in the green energy transition."

With that in mind, its updated strategy accelerates its transition process and increase efficiency. "One thing has not changed since 2016: we remain deeply committed to the transformation of our traditional fossil-fuel-based operations into a low-carbon, sustainable business model," said CEO Zsolt Hernadi.

Given the "structural, long-term decline in fossil motor fuel demand" in its region, MOL will continue and accelerate its fuel-to-chemicals transformation to become a sustainable chemicals company. It is targeting $1.2bn at least in pre-tax earnings by 2025. MOL will also integrate circular technologies into its core businesses, using bio- and waste-based streams in production, scaling up recycling and using carbon capture, use and sequestration (CCUS) opportunities. The total downstream transformation capital expenditure (capex) may reach $4.5bn in the next ten years.

Upstream the focus will be on cash generation and in CCUS in the Pannonian basin in order to become carbon neutral. Existing resources will continue to be managed to maximise cash generation and value creation with around $1.8bn simplified free cash flow in 2021-25 at $50/barrel Dated Brent. But it is not setting any volumetric targets. 

"Sustainability and profitability are not mutually exclusive concepts; they have to go together. You cannot be sustainable without generating revenues, nor can you be profitable without focusing on how those revenues are generated; they go hand in hand. This has been evident for some time and will increasingly be clear to everyone in the future," Hernadi said.

MOL wants to significantly increase its climate-friendly investments to exceed 50% of total capex by 2030 and to approach 100% by 2050, or earlier. MOL also wants to play a key role in shaping the low-carbon circular economy in new businesses such as waste integration and use, recycling, advanced biofuels and potentially hydrogen-related opportunities. In the next five years, MOL will spend $1bn on new, low-carbon and sustainable projects.

MOL will reduce group-level emissions by 30% by 2030, make both upstream and consumer services divisions carbon-neutral – in terms of Scope 1 and 2 emissions – by 2030. MOL also shares the EU's ambition to be climate neutral by 2050 in terms of Scope 1-3 emissions and to participate in the industrial revolution required to make Europe carbon-neutral.

MOL will generate sufficient operating cash flows in 2021-25, with Ebitda rising from $2.3bn in 2021 to $2.6bn in 2025.  Keeping a strong financial profile through a robust balance sheet and ample financial headroom remains a priority in order to fund new business opportunities, including cash-generative takeovers in any business lines, it said.