Statement of the Chairman of the Executive Board
Dear Shareholders,
In the past financial year, OMV again demonstrated its strong profitability, generating the highest net income in its history with a net income for the year of EUR 2.1 bn. And that was in an extremely challenging market environment. The path there was difficult, but the formula is simple: We produced more and sold more – while reducing costs. The foundation for this success is our strategy which we pursue consistently, but above all the commitment and performance of the approximately 20,000 employees who work for OMV around the globe.
"We will extend the value chain of oil beyond petrochemical processing to recycling."
RAINER SEELE
Chairman of the Executive Board
Setting the course for the future
Whereas this report looks back, highlighting the events of the past financial year, I would also like to look forward. In view of climate change, a serious challenge we all – politicians, the public, and enterprises – face and for which we need to quickly develop solutions, I would like to directly address two issues. Will the foundations for OMV’s business remain the same or will they change? Will we continue to be as successful in the future as we are today? I am sure about the answer to one of these questions and convinced about the other. For one, we can definitely assume that the conditions under which OMV does business will change as a result of the energy transition. Fossil energy sources will play a different role in the future than they do currently. Secondly, I am confident that OMV will actively leverage this changing environment to our benefit. After all, we have already begun to set the stage and can also build on the great innovative capabilities of our company.
Market performance varies
The energy transition will play out differently in various markets and segments, and progress at different speeds. Whereas demand for fossil fuels in Europe is declining, it will increase in the growing markets of Asia, the Middle East, and Africa. We are in an optimal position to benefit from these market opportunities thanks to our production of oil, stakes in refineries and trading joint venture in Abu Dhabi as well as our gas production activities in Malaysia. In addition, freight, shipping, and air traffic even in Europe will not be able to continue without liquid fuels in the short to medium term. For this reason, we will contribute substantially to a lower-carbon future with Co-Processing of biogenic components and the further development of synthetic fuels.
Natural gas – quick solution and long-term complement
In addition to innovations that will be implemented in the medium to long term, we also require effective solutions to roll out quickly during the energy transition. One of these is the increased use of natural gas in transportation as well as in power generation, in particular, which will enable an immediate sharp reduction in carbon emissions. However, gas is not just a short-term replacement for coal, but also the perfect long-term complement to renewable energies. Unavoidable volatility in green energy generation can be balanced out quickly by gas-fired power plants to provide a secure energy supply. I am convinced that natural gas will play a key role in the energy transition. At OMV, we are addressing these issues by further gradually increasing the share of natural gas in our portfolio.
From oil as a commodity to a high-quality product
Regardless of the fact that the importance of oil as a source of energy will decline, crude oil remains a highly valuable raw material. Oil is a cornerstone of the chemical industry and therefore an integral building block of our civilization, our prosperity, and our wellbeing. High-quality products we use every day – from clothing to laptops and smartphones – and light, durable, and safe materials for the automotive and aircraft industries use crude oil as a feedstock, as do lifesaving drugs and many other medical products. OMV’s refineries today already feature a high level of petrochemical integration, and we will further extend the value chain to include additional chemical activities in line with our strategy. A specific example of this is the expansion of the petrochemical facilities at our Burghausen refinery in Germany that began last year. An ISO C4 facility is currently being built there. From the fourth quarter of this year, high-purity isobutene, a feedstock for key chemical products like adhesives, lubricants, and even vitamin C, will be produced there.
Recycling – environmental protection and business model
As with all items we use on a daily basis, the question to ask about plastics is: What should we do with it at the end of its life cycle? OMV has developed a high-quality recycling method called ReOil® in which waste plastics are converted into synthetic crude oil. This in turn can be processed further into fuels or basic petrochemical components. The process involves chemical recycling without a loss of quality which allows plastic to become a valuable raw material instead of turning into waste at the end of the product cycle. This enables us to extend the value chain of oil beyond petrochemical processing to recycling. At the same time, this technology shows that environmental protection and profitability can go hand in hand. It is important evidence of the innovative strength of our industry and OMV as a company. Last year, we made considerable progress on our ReOil® pilot plant at the Schwechat refinery and are optimistic that we can grow it into a fully usable, economically viable, industrial-scale facility by 2025.
Making CO2 useful
The circular economy plays a key role in OMV’s planning – including with regard to CO2. We should not demonize the CO2 molecule: we must – and can – work with it. For instance, we are researching technologies for further processing CO2 into the energy source methane or methanol, an important chemical feedstock, and making it economically viable. Moreover, we are looking into options for storing carbon dioxide underground. The use of these technologies assumes that the legal environment supports them, but this is not yet the case in some countries, including Austria. Nonetheless, the European Commission is sending positive signals with the recent unveiling of its Green Deal. The Commission has acknowledged the usefulness and potential of this technology and wishes to promote it. In our long-term strategy, we are working on various options for using hydrogen – for transportation as well as industrial applications. I am certain that hydrogen will be a key element in the energy mix of the future.
The conditions underlying our business will change. OMV is anticipating this and will unlock the opportunities brought about by such a shift. We will significantly expand our value chain and develop business models that contribute to a lower-carbon future, while at the same time ensuring that our company’s business continues to be successful. We are already setting the stage. There are 20,000 reasons to look forward to the future. Thank you for your trust in OMV.
Vienna, March 11, 2020
Rainer Seele m.p.