Strategy

OMV will transform from an integrated oil, gas, and chemicals company into a leader in innovative sustainable fuels, chemicals, and materials, leveraging opportunities in the circular economy. The Group aims to become a net-zero emissions company by 2050 for all three scopes of greenhouse gas emissions. By taking this path, OMV expects*Note: The financial targets for 2025 are based on the following market assumptions: Brent oil price of USD 65/bbl, THE (Trading Hub Europe) gas price of EUR 22/MWh, refining indicator margin Europe of USD 4.3/bbl, ethylene/propylene indicator margin Europe of EUR 430/t, polyethylene/polypropylene indicator margin Europe of EUR 420/t. The financial targets for 2030 are based on the following market assumptions: Brent oil price of USD 70/bbl, THE (Trading Hub Europe) gas price of EUR 24/MWh, refining indicator margin Europe of USD 4.3/bbl, ethylene/propylene indicator margin Europe of EUR 500/t, polyethylene/polypropylene indicator margin Europe of EUR 480/t. to deliver an operating cash flow excluding net working capital effects of around EUR 6 bn by 2025 and at least EUR 7 bn by 2030, a ROACE of at least 12%, and will continue its progressive dividend policy.

Market outlook

Toward the end of the last decade, global warming and climate change took center stage as some of the most pressing global challenges of our times. In addition, the COVID-19 pandemic significantly impacted the energy markets in 2020. The disruption of supply and demand dynamics has led to the current energy price escalation. It has also accelerated the emergence of sustainability as a mega trend to tackle the challenges of climate change and, consequently, the energy transition. The ultimate objective of the energy transition is to reduce the greenhouse gas (GHG) footprint of the global energy system to achieve net-zero emissions and limit the global temperature rise to no more than 1.5°C by 2050.

The goal of achieving net-zero emissions by 2050 has emerged as a global consensus and is poised to become the new norm and license to operate for corporations. A total of 136 countries representing more than 77% of global carbon emissions and 80% of GDP have made some form of net-zero commitment as of November 2021. Businesses around the world have reacted and pledged to achieve net-zero by 2050. These include leading oil and gas, and chemical companies. The European Union is committed to transforming its net-zero objective into the EU’s Climate Law.

The demand for fossil-based commodities will change dramatically due to the restructuring of the global economy and the adaptation of consumer behavior to the net-zero path. While fossil-based energy products will face decline, new business and growth opportunities will open up in adjacent areas, as demand will increase for solutions that can reduce GHG emissions. These are, for example, natural gas as a transition energy source, renewable energy, biofuels, hydrogen, carbon capture, utilization & storage, or CCU/S, geothermal, value chain extension toward more valuable products such as chemicals and polymer solutions, and growing developments toward a circular economy. This expected shift to novel solutions demands investment in low-GHG-emissions technologies, and circular economy solutions, where great potential is assumed even though the business models are still uncertain.

Despite all the efforts aimed at reducing GHG emissions and generating strong growth in renewables, the oil and gas sector is anticipated to remain the main source of primary energy in the next decade. Based on the International Energy Agency World Energy Outlook (IEA WEO) 2021, total energy supply grows by 1.3% per year from 2020 to 2030 in the IEA Stated Policies Scenario (STEPS), reaching 670 exajouls (EJ) by 2030, whereas oil and gas demand growth compared to renewables is roughly split equally. The IEA STEPS assumes a fossil fuels share of 75% in the global energy mix in 2030, and 66% in 2050. This expected growth trajectory might change, if current announcements regarding emissions targets materialize, leading to a decline of fossil fuel demand and supply. This trend is in accordance with the IEA Sustainable Development Scenario (SDS) of the WEO 2021, showing a potential path toward fulfillment of the UN climate goals, factoring in high political ambitions.

World total primary energy supply

In EJ

While oil consumption is expected to decline in mature markets such as North America and Europe, global growth beyond 2030 will stem from Asia, the Middle East, and Africa. Peak oil demand is anticipated in the coming decade. Natural gas, on the other hand, which leads to 10–30% lower GHG emissions compared to oil products, will provide a reliable and resilient fuel choice for the energy transition. This will lead to an increase in its demand, with strong momentum from industry and, in particular, the construction sector.

Given the above-mentioned trends, the refining business model in Europe will face declining fossil fuel demand, triggered by the decarbonization of road transportation. Consequently, this sector will have to respond strategically to this circumstance. The retail segment will be resilient but will shift increasingly from fuel to EV charging, hydrogen, and convenience. The share of biofuels, and especially advanced biofuels, an additional enabler for meeting net-zero targets, is expected to increase sharply until 2030. This will be triggered by regulations and end-users, especially in hard-to-electrify segments, such as marine, aviation, and heavy-duty transport.

Oil demand for chemical production is expected to increase, primarily originating from rising demand in emerging markets and closely linked to GDP development. Approximately 80% of chemical and plastic demand growth will be concentrated in emerging markets, mainly Asia, until 2030 and beyond. This region represents most of the global population growth and the corresponding potential for improving living standards. Average oil demand for chemical products in emerging markets is expected to expand at the rate of above 1% above global GDP growth until 2030.

For mature markets such as Europe, North America, and Japan, demand growth is anticipated to remain healthy in the long term, in line with economic development, but growth rates are expected to slow.

Polyolefins are the largest market segment in producing plastic goods. Demand for virgin polyolefins continues to grow at a rate above global GDP until 2030, driven by the Asian market. Polyolefins remain essential for various industries, including packaging, construction, transportation, healthcare, pharmaceuticals, and electronics.

The key success factor for medium- to long-term sustainable business models is growth in renewable feedstocks, bioplastics, and the development of circular solutions. Recycled polyolefin demand is expected to grow at a rate significantly above global GDP until 2030, with Asia having the largest share.

Over the next decade, key focus areas for the plastics industry will be continued improvement in waste collection, the redesign of plastics and their applications for increased recyclability, and improvements in recycling technologies . Global recycling rates are projected to increase from 17% today to 20% by 2030, while Europe is expected to see even higher recycling rates.

Based on the market development outlook, as described above, OMV developed two forward-looking energy market frameworks. OMV’s base case scenario is built on the IEA Stated Policies Scenario (STEPS) taken from the World Economic Outlook and adjusted based on an assumption that the EU, the United States, China, Japan, and South Korea (with a two-year delay for political alignment and measuring effectiveness) follow the IEA Sustainable Development Scenario (SDS) and meet the Paris Agreement targets. OMV’s stress case is built on the IEA SDS Scenario, where the entire world reaches the Paris Agreement commitment of net-zero by 2070. The SDS is used for downside sensitivity analysis to generally understand how the existing and future portfolio will perform in this business scenario. In this scenario, global oil markets will start a continuous downward production trend, with a significant gradient toward 2040, and natural gas markets will peak in 2030 with a strong decline thereafter. European gas demand is expected to decline by 25% by 2030, with a strong phaseout until 2050.

Note: The financial targets for 2025 are based on the following market assumptions: Brent oil price of USD 65/bbl, THE (Trading Hub Europe) gas price of EUR 22/MWh, refining indicator margin Europe of USD 4.3/bbl, ethylene/propylene indicator margin Europe of EUR 430/t, polyethylene/polypropylene indicator margin Europe of EUR 420/t. The financial targets for 2030 are based on the following market assumptions: Brent oil price of USD 70/bbl, THE (Trading Hub Europe) gas price of EUR 24/MWh, refining indicator margin Europe of USD 4.3/bbl, ethylene/propylene indicator margin Europe of EUR 500/t, polyethylene/polypropylene indicator margin Europe of EUR 480/t.