OMV Group Business Year

In the year 2020, OMV recorded a clean CCS Operating Result of EUR 1.7 bn. The cash flow from operating activities amounted to EUR 3.1 bn. Despite the very challenging market environment, OMV delivered an organic free cash flow before dividends of EUR 1.3 bn, which was more than sufficient to cover the payment of dividends in the amount of EUR 879 mn. The inorganic cash flow from investing activities was EUR 4.1 bn, mainly reflecting the acquisition of the additional share in Borealis.

Business environment

After years of solid global economic growth, the world experienced a shock in 2020 from COVID-19. The global pandemic and related health crisis caused a strong global economic recession. Several lockdown periods in different countries on various continents during 2020 led to significant economic distortions along industrial production, trade, and supply chains and adversely affected all sectors reliant on contact-intensive interactions (tourism, travel, hospitality, culture, entertainment).

Global economic output fell by 3.5% in 2020, implying reduced economic activity across all sectors and elevated unemployment rates. In 2021, economic performance should rebound to somewhat above 2019 levels. However, the expected recovery will be heavily influenced by the great uncertainty as to the future course of the pandemic and the associated disruptions of domestic activity, the effects of government-implemented economic support policies in response, and global and regional economic spill-over effects. Global trade contracted by almost 10% in 2020 caused by substantial disruptions in global supply chains and trade restrictions (e.g., on medical supplies). A return of the economy to its pre-crisis framework and structure will depend on the successful global penetration of a vaccination and treatments.

The varying regional speed of pandemic waves has led to huge disparities in economic performance on different continents. The eurozone’s gross domestic product (GDP) fell by 7.2% in 2020. In the emerging and developing Asian countries, this figure decreased by only 1% due to rigorous quarantine and contract tracing measures, especially in China, which enabled a return to growth in late 2020.

The economic environment in Central and Eastern European countries kept pace with the EU average, with GDP declining by between –2% (Serbia) and –9.4% (Croatia). The difference depended on the regional duration and scale of lockdowns, and the GDP sector composition. Massive government spending in all countries aimed to support economic recovery, but increased national debt to record levels.

Germany’s GDP declined by 5.4% in 2020 as a result of domestic COVID-19 restrictions as well as negative effects in the country’s main export markets. The industrial and service sectors continued to suffer, while other sectors were able to rebound as soon as lockdown restrictions eased. In Austria, GDP fell by 7.4% in 2020 due to stronger lockdown restrictions and the affected tourism/service sector accounting for a larger share of the economy. Romania’s economy contracted by 5.5% (greater than the Eurozone average) due to its GDP’s reduced reliance on services and the buoyancy of the construction sector.

Global oil demand declined by 8.8 mn bbl/d in 2020 after a new record high level of 100.0 mn bbl/d in 2019. The spread of COVID-19 from Asia to Europe and the United States (and other continents) in the first and second quarter 2020 led to various global containment measures. As a result, nearly all major oil products were impacted negatively. Road transportation fuels, including gasoline and gasoil/diesel declined by around 5 mn bbl/d globally. However as soon as lockdown restrictions eased, consumption slowly returned to pre-crisis levels by the end of 2020. Jet fuel/kerosene witnessed an exceptional decline due to air travel and mobility restrictions, falling 3.2 mn bbl/d. It will take a multi-year recovery to return to 2019 levels when global tourism revives.

Regionally, European oil product demand felt a greater impact (–13%) than Asia (–5%), where lockdown measures were eased in the second half of 2020 and economic growth recovered.

Global oil demand disruptions led to sudden significant disparities in global oil production – especially in the second quarter 2020. In March, the OPEC+ alliance and additional oil producing countries agreed to a significant immediate oil production cut and a stepwise return by 2021, which was implemented with a high production compliance rate. The oil price drop dried up US crude oil production (–0.9 mn bbl/d vs. 2019) and ushered in an exceptional wave of bankruptcies, lagging investments, and consolidation. Libya, Venezuela, and Iran, all exempt from the OPEC+ cuts, managed to raise output. Most of this came from Libya, which rapidly increased production from approximately 100 kbbl/d to around 1 mn bbl/d after a cease-fire agreement was signed in September. Iran and Venezuela remained affected by US sanctions and infrastructure constraints, which left their production at comparatively low levels.

The price of Brent crude started with peaks around USD 65–70/bbl before a dramatic collapse to about USD 13/bbl during the second quarter 2020, when the full impact of COVID-19 lockdowns hit the United States and Europe. Effective OPEC+ supply management and the gradual recovery of economic activity, particularly in Asia, led to a surge in oil prices to around USD 50/bbl at the end of 2020. This was also fueled by the positive mood around the start of vaccination programs and economic stimulus measures. Overall, the average Brent crude price was approximately USD 42/bbl in 2020, its lowest level since 2004.

Low commodity prices and an unstable financial and liquidity environment caused an approximately 18% decline in energy investments by energy companies in 2020. Oil and gas investments declined by nearly 40% in 2020 (vs. 2019). This will have to be compensated for in the coming years to ensure the required oil and gas production for covering future global oil demand.

Oil product demand in the Central and Southeast European countries relevant to OMV followed the global decline trend. Transportation fuel demand fell by around 8% for gasoline and diesel and by more than 50% for jet fuel in the relevant markets in 2020. Austria’s market volume reached 9,6 mn t (–16% compared to 2019), with demand for fuels down and demand for heating oil increasing due to a favorable cost situation. In total, Austrian energy demand likely fell by –8% in 2020. The Romanian oil product market seemed less exposed to the impact of COVID-19, only declining by –3% compared to 2019.

Global gas demand declined by only around –4% in 2020 due to a milder COVID-19 impact on gas fundamentals than was the case for oil. However, the global gas supply (mainly LNG exports) continued to rise significantly, triggered by an investment cycle in recent years. The greater cyclical oversupply led to extraordinarily low gas prices in Europe (around EUR 7/MWh during the summer months) and Asia. In Austria, gas demand fell by some –4% in 2020, while natural gas imports and domestic production dropped by –12% and –18%, respectively. This was compensated for by higher storage withdrawal rates after last year’s record-high storage level of 90 TWh.

Crude price (Brent) – monthly average

In USD/bbl