Downstream

OMV’s Downstream business refines and markets fuels, chemicals, and gas. It operates three inland refineries in Europe and holds a strong market position within the areas of its refineries, serving a strong branded retail network and commercial customers. In the Middle East, it owns 15% of ADNOC Refining and ADNOC Global Trading. In 2020, OMV increased its share in Borealis to 75%, strengthening its chemical business and extending the value chain into polymers. In gas, OMV is active along the entire gas value chain.

Financial performance

At EUR 1,514 mn, the clean CCS Operating Result declined by 10% compared to the same period of the previous year (2019: EUR 1,677 mn). Negative effects of COVID-19 on demand as well as on refining margins could not be fully offset by a strong natural gas and retail business and a significant positive contribution of margin hedges. OMV Petrom’s input to the clean CCS Operating Result of Downstream amounted to EUR 448 mn (2019: EUR 387 mn).

The OMV refining indicator margin declined by 45% to USD 2.4/bbl (2019: USD 4.4/bbl), primarily due to the negative effects of the COVID-19 pandemic. Substantially lower middle distillate and lower gasoline cracks following a weak macro environment put considerable pressure on refining margins. Lower feedstock costs, a result of lower crude oil prices, and improved heavy fuel oil and naphtha margins could not offset these effects. In 2020, the utilization rate of the refineries reached a resilient level of 86% (2019: 97%) despite the imposed lockdown measures related to COVID-19. At 17.8 mn t, total refined product sales volumes were down by 15%, following lower demand as a result of imposed travel restrictions. The commercial business experienced lower sales volumes, in particular demand for jet fuel dropped sharply, while margins in the commercial business remained stable. The result in the retail business increased despite a reduction of 10% in retail sales volumes, following higher margins and a larger share of premium fuels.

The contribution of the petrochemicals business declined by 7% to EUR 224 mn (2019: EUR 241 mn) mainly as a consequence of lower petrochemical margins, which were partially offset by slightly higher petrochemical sales volumes. The ethylene/propylene net margin contracted by 8%. While the butadiene net margin weakened considerably, benzene net margin decreased to a lesser extent.

The contribution of Borealis slightly decreased to EUR 300 mn (2019: EUR 314 mn). Following the acquisition of an additional 39% stake on October 29, 2020, the Borealis result was fully consolidated for the last two months of 2020. The effect from the full consolidation was offset by a weaker market environment, sizeable negative inventory effects as a consequence of this, and unplanned outages at the Stenungsund and Porvoo crackers. While polyolefin margins remained at a healthy level, polyolefin sales volumes slightly increased due to higher sales in the packaging sector, partially offset by lower sales in the automotive sector. The fertilizer business declined following a solid performance in 2019, mainly as a result of weaker margins and operational issues in Q4/20. The contribution from Borouge was down slightly mainly due to weak market conditions in Asia in the first half of the year.

In 2020, the contribution of ADNOC Refining & Trading came in at EUR (107) mn (2019: EUR 8 mn). As of Q1/20, the ADNOC Refining & Trading result is calculated based on Current Cost of Supply (CCS) and excludes inventory holding gains/losses. The adverse market environment in 2020 weighed on the result. In addition, the result was negatively impacted by an extensive turnaround of the Ruwais refinery complex, which started at the beginning of February and lasted into Q2/20. Despite challenging market circumstances, ADNOC Global Trading was successfully launched at the beginning of December.

The contribution of the gas business grew by 73% to EUR 337 mn (2019: EUR 194 mn) mainly as a consequence of the substantially improved power business in Romania as well as the greatly improved performance of the storage business and lower depreciation. Gas Connect Austria is reclassified as an asset held for sale. The power business in Romania provided strong support thanks to favorable forward contracts, increased revenues from the electricity balancing market, and a one-off revenue recovery stemming from a 2019 power price regulation. Natural gas sales volumes rose significantly from 136.7 TWh to 164.0 TWh, driven by higher sales volumes in Germany, the Netherlands, Belgium, and Austria.

Net special items amounted to EUR 1,071 mn (2019: EUR 31 mn). With the closing of the Borealis transaction, OMV realized a step-up in the valuation of the previous 36% share in Borealis and booked a special item of around EUR 1.3 bn. CCS effects of EUR (425) mn were caused by the sharp drop in crude oil prices in the first half of 2020. As a result, the Operating Result of Downstream increased by EUR 313 mn to EUR 2,160 mn (2019: EUR 1,847 mn).

Capital expenditure in Downstream amounted to EUR 4,930 mn (2019: EUR 2,774 mn) and was mainly related to the acquisition of an additional 39% stake in Borealis for USD 4.68 bn. In 2019, capital expenditure included the acquisition of a 15% stake in ADNOC Refining and Trading Joint Venture for USD 2.43 bn. Organic capital expenditure in 2020 was predominantly related to investments in the European refineries and in Borealis.