Downstream Oil

Downstream Oil operates along the entire oil value chain: In Europe, it processes equity and third-party crude and other feedstock in three highly competitive inland refineries with an annual capacity of 17.8 mn t. These are located in Schwechat (Austria), Burghausen (Germany), and Petrobrazi (Romania). In Austria and Germany, OMV is forward integrated into petrochemicals, with Borealis (OMV stake: 36%) as a key customer. Total annual petrochemical production, including Romania, amounts to a capacity of 2.5 mn t. In 2019, Downstream Oil expanded in the Middle East with a 15% share in ADNOC Refining and a new Trading joint venture, thus establishing a strong integrated position in Abu Dhabi. Furthermore, OMV markets refined products to commercial customers in Europe as well as through its retail network of approximately 2,100 filling stations. Total refined product sales amounted to 20.9 mn t.

Refining including product supply and sales

In 2019, the refining margin weakened compared to the previous year. Refining economics came under pressure in the first half of the year due to very weak light distillate markets suffering from an oversupply situation. A slight rebound was seen in the third quarter as middle distillate markets improved. However, rising crude prices at the end of the year again added pressure and led to lower average refining margins than in 2018. Despite the year-on-year decline, the refining economics were still healthy, supported by strong demand for middle distillates after some logistical issues in Europe in 2018. This kept inland premia at high levels in 2019. In 2019, the overall utilization rate of OMV’s European refineries reached an extraordinary level of 97% (2018: 92%). The high processing flexibility of feedstock, allowing the use of more than 200 different types of crude oil in OMV’s western refineries, contributed to a strong Downstream Oil result thanks to optimal feedstock sourcing.

The regional proximity of the three European sites allows OMV to operate them as one integrated refinery system. Intermediate feedstocks are exchanged between the refineries in order to optimize product flows and maximize returns. This system allows OMV to strategically align investments, fully capitalize on the flexibility created by shifting output toward high-value products, and leverage economies of scale.

In the petrochemical business, sales volumes were marginally lower compared to 2018 as the result of a cracker outage in Burghausen early September. Average petrochemical margins were slightly below the 2018 average due to weak Q4/19 margins. This reflected lower global GDP growth rates. Butadiene margins were impacted by declining demand in the automotive industry, as the primary use for butadiene is in the production of Styrene Butadiene Rubber (SBR), which is mainly used in the manufacture of automobile tires. Benzene oversupply and a weak demand environment, which had persisted since Q2/18, continued into Q1/19 and brought margins under heavy pressure. Margins gradually recovered during Q2/19 and Q3/19 as supply tightened amid planned and unplanned European cracker shutdowns and reduced import pressure from other regions.

Retail

The strong performance in the retail business increased further in 2019 and proved once again to be a stable outlet for refinery products and a strong cash generator. Total sales increased by 3% to 6.5 mn t, equivalent to approximately 8 bn liters. The average throughput increased to 3.88 mn liters (+3% vs. 2018) on the back of strong performance in all key markets and a favorable market environment. At the end of the year, the network comprised 2,075 filling stations (2018: 2,064). OMV continues to focus on its successful multi-brand strategy with a planned further expansion in Germany based on an agreement with Aldi Süd. The OMV brand is positioned as a premium brand, with VIVA representing a strong shop, gastronomy, and service offering. The Avanti brand of unmanned filling stations represents the discount segment, while the Petrom brand represents value for money. This strategy has continued to deliver great results, and profitability per site has increased as well. Sales of OMV’s premium MaxxMotion-brand fuels have reached an all-time high at approximately 800 mn liters, proving the premium-quality advantage even in a generally higher fuel price environment. The non-fuel business, such as the VIVA convenience stores and car washes, continued to perform very well, contributing 6% more net margin growth than in 2018. The focus on the high-quality products and services in the premium filling station network remains one of OMV’s key differentiators. Our new VIVA private-label products such as VIVA iced coffee and snacks contributed to an improved retail result as well.

Borealis

Borealis’ contribution to the clean Operating Result declined by 13% to EUR 314 mn (2018: EUR 360 mn). The 2019 result was driven by a weak polyolefins market in Asia, leading to a significantly lower contribution by Borouge to Borealis’ financial result. Satisfactory integrated polyolefin margins in Europe and a recovery in the fertilizer market mostly have offset this negative impact.

On June 7, 2019, the Finnish and Austrian tax authorities reached an agreement on two cases regarding the taxation of Borealis Technology Oy and Borealis Polymers Oy. The dispute was resolved through a Mutual Agreement Procedure (MAP) between Finland and Austria. Borealis welcomes the agreement, which finally eliminates double taxation.

Bayport Polymers (Baystar), the 50/50 joint venture between Total and Novealis Holdings (50/50 joint venture between Borealis and NOVA Chemicals), held its official groundbreaking ceremony for the construction of a new 625,000 t per year Borstar^® polyethylene unit at its production site in Pasadena, Texas. Start-up is anticipated in 2021.The state-of-the-art Borstar technology, which will be used in North America for the first time, will allow Baystar to produce enhanced polyethylene products for the most demanding applications. Baystar is also building a steam cracker in Port Arthur, Texas, with a capacity of 1 mn t per year. The new cracker will process ethane, which is abundantly available and competitively priced in the United States. It will supply feedstock for its existing 400,000 t per year polyethylene units as well as the new Borstar^® polyethylene unit in Pasadena.

In addition, Borealis and NOVA Chemicals announced in January 2020 that they have reached an agreement for Borealis to buy NOVA Chemicals’ 50% ownership interest in Novealis Holdings. Completion of the acquisition is subject to customary regulatory approvals and other conditions. It is not subject to any financing conditions. The parties expect the transaction to close in the first half of 2020.

On September 9, Borealis held the groundbreaking ceremony for its new, world-scale propane dehydrogenation (PDH) plant. Located at the existing Borealis production site in Kallo, Belgium, the new facility will have a targeted production capacity of 750,000 t of propylene per year, making it one of the largest and most efficient plants of its kind in the world. With a total of around EUR 1 bn invested in the course of the project, the investment is the largest ever made by Borealis in Europe. It underscores the company’s commitment to its operations on the Continent, and to being the supplier of choice to its European customers.