Business Overview

In the Chemicals & Materials segment, OMV is one of the world’s leading providers of advanced and circular polyolefin solutions and a European market leader in base chemicals and plastics recycling. The Company supplies services and products to customers around the globe through OMV and Borealis and its two joint ventures: Borouge (with ADNOC, based in the UAE and Singapore) and Baystar (with TotalEnergies, based in the United States). The segment comprises the production of base chemicals integrated with OMV operated refineries in Austria and Germany, the Borealis business of base chemicals and polyolefins, and the joint ventures.

OMV announced in July 2023 that it had decided to pursue negotiations with ADNOC on a potential cooperation regarding their polyolefins businesses. Such cooperation would include a potential combination of the Borealis and Borouge businesses as equal partners under a jointly controlled, listed platform for potential growth acquisitions to create a global polyolefin company with a material presence in key markets.

Base chemicals

Base chemicals are building blocks for the chemical industry and are transformed into plastics, packaging, clothing, and many other consumer products.

While the refinery-integrated, OMV operated steam crackers in Schwechat and Burghausen mainly use naphtha as a feedstock, the steam crackers operated by Borealis in Stenungsund and Porvoo are highly flexible on the feedstock they use, employing naphtha, ethane, propane, butane, or any LPG mix. In Kallo, Borealis runs a propane dehydrogenation unit based on 100% propane feedstock.

The OMV Group produces base chemicals such as olefins (ethylene, propylene, butadiene, and high-purity isobutene) and aromatics (benzene and phenol).

• Ethylene and propylene are important chemical building blocks for producing polyolefins (polyethylene and polypropylene), which are in turn used to manufacture a wide variety of consumer and industrial products.
• Aromatics such as benzene are used as starting materials for heat insulating materials and consumer products, including clothing, pharmaceuticals, cosmetics, computers, and sports equipment.
• C4s (e.g., butadiene and butene) are used in a variety of applications, with butadiene primarily used in manufacturing synthetic rubber, making it a fundamental material for the tire and automotive industries. Butenes are used in specialty chemicals, such as oxo-alcohols for plasticizers and polyols for coatings and synthetic lubricants.
• High-purity isobutene is a feedstock for key chemical products like adhesives, lubricants, and vitamins.
• Phenol and acetone are sold mainly to the polycarbonate and epoxy resin industries. Phenol is also used in phenolic resins and in caprolactam. Acetone is also an ingredient in solvents and MMA for PMMA (plexiglass).

Even though OMV’s European crackers were running at higher utilization rates than Europe’s average, base chemicals results were burdened by an economic downturn in Europe. The overall European performance for the year remained weak in terms of volumes and margins, falling below last year’s levels due to subdued demand throughout the supply chain from olefin to derivatives. OMV’s Profit Improvement Program partly compensated for the margin and volume shortfall. The gap between the price of ethylene and propylene widened from 2022 to 2023, as refinery throughput remained high on healthy fuel margins. While chemical demand weakened further, new capacities coming online globally created additional pressure. Moreover, in comparison to 2022, the European cracker turnaround season in 2023 turned out to be very moderate and had less impact than usual on available production capacities.

The propane dehydrogenation (PDH) margin came in low at the beginning of 2023 as a result of higher demand for propane in the winter season. Propane prices weakened in comparison to naphtha prices due to lower demand throughout the year, leading to a positive impact on PDH margins. Toward the end of 2023 PDH margins continued to be healthy, driven by high propane storage levels and a mild winter.

The butadiene indicator margin declined to historically low levels this year as a result of weak demand. Even though car sales were higher than in 2022, the tire replacement rate remained below historic averages. In December 2023, OMV and Synthos signed an MoU for the supply of sustainable butadiene for the synthetic rubber used in tire manufacturing. The sustainable butadiene will be produced in the OMV steam cracker at the Burghausen refinery in Germany, which received full ISCC PLUS certification in 2022. OMV delivered the first batch of sustainable butadiene to Synthos in 2023.

The benzene indicator margin came in below last year’s levels on the back of weak European demand. The downturn in consumer activity in almost all sectors had a negative impact on the industry.

Polyolefins

Through its subsidiary Borealis, OMV is the second-largest polyolefin producer in Europe and among the top ten producers globally. Borealis operates seven polyolefin plants located in Schwechat, Stenungsund, Porvoo, and Burghausen, where they are integrated with steam crackers, as well as in Beringen and Kallo, where they are integrated with the existing PDH facility, and in Antwerp. In addition, Borealis operates several compounding plants in Europe, the United States, South Korea, and Brazil.

The value-added polyolefin products manufactured by Borealis are the foundation of many valuable plastics applications that are an intrinsic part of modern life. Advanced Borealis polyolefins have a role to play in saving energy along the value chain and promoting more efficient use of natural resources. Borealis works closely with its customers and industry partners to provide innovative plastics solutions that create value in a variety of industries and segments. These solutions make end products safer, lighter, more affordable, and easier to recycle. In short: they enable more sustainable living. Borealis offers advanced polyolefins for virgin and circular economy solutions, servicing the following key industries: consumer products, energy, healthcare, infrastructure, and mobility.

The polyolefins market remained weak overall in 2023, but was temporarily bolstered from January to April by the spring turnaround season and optimism surrounding China’s post-COVID–19 reopening. Industry profitability plummeted in the summer months, with unprecedented levels of industry destocking due to underlying factors such as import pressure, high inventories, expectation of falling polyolefins prices, and the annual demand slowdown during the holidays. Industry profitability and operating rates fell to levels last recorded during the height of the global financial crisis of 2007–2008. While industry profitability recovered somewhat later in the year, it remained very weak.

Renewable and circular chemicals

Plastics continue to play a vital role in the economy and in our business, making our lives more efficient, convenient, and safe. Yet, when insufficient effort is made to recover and reuse plastics, most of them end up in landfill or incineration. The vision of a circular economy, where we optimize resource efficiency and reuse, recycle, and repurpose endlessly, is both a business imperative and an opportunity. Demand for recycled plastics is growing due to increasing public awareness of the importance of using resources sustainably to ensure a climate-neutral future.

The circular economy opens up new ways to reinvent the economy in the interest of preserving natural capital and minimizing waste. OMV and Borealis are pursuing various initiatives in mechanical and chemical recycling, Design for Recycling (DfR), and circular polyolefins that are manufactured with second-generation renewable feedstock. While mechanical recycling has proven to be effective and will likely remain the eco-efficient method of choice for the foreseeable future, chemical recycling will play an increasingly important role to complement it for hard-to-recycle materials and for achieving virgin-grade properties.

Borealis is cementing its position as a fully customer-centric supplier of sustainable material solutions that add value to society and accelerate the transition to a circular economy. Long an industry front-runner in circularity, Borealis continues to lead by steadily increasing the share of circular products in its overall production output. These include recycled and renewable-based polymers in its Borcycle™ C, Borcycle™ M, and Bornewables™ grade portfolios, as well as the renewable hydrocarbons in the Borvida™ family of base chemicals.

Following the certification of the Borealis polyolefin compounding site in Monza (Italy) in July 2023, all Borealis polyolefin and polyolefin compounding sites in Europe have now been ISCC PLUS certified. This mark of quality ensures traceability of critical points along the supply chain by way of objective and third-party verification. Recycling facilities operated by Renasci in Oostende (Belgium), mtm in Niedergebra (Germany), and Ecoplast in Wildon (Austria) have also been ISCC PLUS certified.

Borealis was the first virgin polyolefins player in Europe to have entered mechanical recycling by acquiring mtm plastics in 2016, and Austria-based Ecoplast in 2018. 100% owned by the Borealis Group, the combined mtm and Ecoplast output will be augmented by high-quality volumes from the recent acquisition of Rialti. Based in the Varese area of Italy, Rialti specializes in the production of sustainable polypropylene (PP) compounds with a focus on mechanically recycled PP feedstock from post-industrial and post-consumer waste. Moreover, the signing of an agreement to acquire Integra Plastics AD, an advanced mechanical recycling player based in Elin Pelin (Bulgaria) took place in November 2023. Closing of this transaction is subject to customary regulatory approvals.

As the chemical recycling process valorizes residual waste streams that would otherwise be landfilled or incinerated, it is a valuable complement to mechanical recycling. The virgin-grade quality of monomers produced in the chemical recycling process makes them suitable for use in the production of high-end polyolefin applications in food-grade consumer packaging, infrastructure, and healthcare.

OMV is currently constructing a demo plant based on its proprietary ReOil^® technology to scale up its chemical recycling capacities. The plant has a capacity of 16,000 t p.a. and is scheduled to start up in 2024. The feedstock will consist mainly of polyolefins and will be sourced initially in Austria in close cooperation with local waste management companies. Examples of such plastic waste include food packaging, plastic cups, lids from takeout coffee, and confectionery packaging. In October 2023, OMV announced the final investment decision to build an innovative sorting plant developed by Interzero, Europe’s leading provider of circular economy solutions, to produce feedstock for chemical recycling. For that purpose, OMV and Interzero established a joint venture, in which OMV holds 89.9% of the shares and 10.1% of the shares belong to Interzero. OMV will invest over EUR 170 mn in building this state-of-the-art facility in Walldürn, southern Germany. With a processing capacity of up to 260,000 t of post-consumer mixed waste plastic per year, this fully automatic sorting facility will be the first of its kind to produce feedstock for OMV’s chemical recycling on a large industrial scale. Construction began in Q4/23 and production is expected to start in 2026. As a next step, OMV aims to develop a commercially viable industrial-scale ReOil^® plant at the Schwechat refinery with a processing capacity of up to 200,000 t/year.

In addition to ongoing collaboration with OMV centered on the patented OMV ReOil^® technology, Borealis is also working closely with its upstream partner Neste and its Neste RE™ technology to take the commercialization of chemically recycled plastics to the next level. The majority stake in Renasci N.V. acquired in late 2023 also gives Borealis ample access to chemically recycled feedstock for the grades in its ISCC PLUS-certified Borcycle™ C portfolio.

Fertilizers, melamine, and technical nitrogen products

In 2020, the OMV Group announced that it had started the divestment process for the nitrogen business unit, which includes fertilizers, technical nitrogen, and melamine. Borealis completed the sale to Czech-based AGROFERT, valuing the business on an enterprise value basis at EUR 810 mn, on July 5, 2023. The sale of the Company’s share in Rosier, which operates the production sites in the Netherlands and Belgium, to Yilfert Holding was completed on January 2, 2023.

Joint ventures

Borouge (Borealis 36%, ADNOC 54%, free float 10%)

Established in 1998, Borouge is a true success story of the long-term partnership with ADNOC. The joint venture has successfully combined the leading-edge Borstar^® technology with competitive feedstock and access to growing Asian markets. Borouge runs ethane-based steam crackers with a capacity of 3.6 mn t p.a. and an olefin conversion unit, converting ethylene into propylene, with a total capacity of around 0.8 mn t p.a. In addition, Borouge operates polyolefin plants with a total production capacity of 5 mn t p.a., thereof 2.7 mn t of polyethylene, 2.2 mn t of polypropylene, and 0.1 mn t of other products. In June 2022, Borouge was listed on the Abu Dhabi Securities Exchange (ADX) with 10% of the total issued share capital. Through Borouge, the Group’s footprint reaches all the way to the Middle East, the Asia-Pacific region, the Indian subcontinent, and Africa.

Baystar (Borealis 50%, TotalEnergies 50%)

The Baystar™ joint venture with TotalEnergies in Pasadena, Texas (US) reached a most significant milestone in October 2023 with the start-up of the new 0.6 mn t p.a. Borstar^® polyethylene unit called Bay 3. This growth project has brought the proprietary technology to the US in the most advanced Borstar^® plant ever built in North America. With the completion of the USD 1.4 bn unit, Baystar™ has more than doubled its production capacity. As a fully integrated petrochemicals venture, it will supply value-added specialty polymers to the booming energy, infrastructure, and consumer product sectors in North America. In addition to the new Bay 3 unit, Baystar™ comprises two legacy polyethylene (PE) production units, Bay 1 and Bay 2, and a 1 mn t p.a. ethane-based steam cracker, which started up in 2022 and is operated by TotalEnergies in Port Arthur, Texas.

Growth projects

Borouge

The largest growth project currently underway is Borouge 4, situated within the Borouge joint venture founded by Borealis and the Abu Dhabi National Oil Company (ADNOC) in 1998. Ground was broken in 2022 for the construction of Borouge 4, the new USD 6.2 bn facility at the existing complex in Ruwais (UAE). The project has an excellent safety record thus far, with a project TRI of 1 for over 27 mn man hours. Upon completion, which is expected for the end of 2025, the Borouge 4 project will add a 1.5 mn t ethane-based steam cracker and two additional Borstar^® polyethylene (PE) units with a total capacity of 1.4 mn t. The increased production capacity of advanced base chemicals and polyolefins that will be unlocked once Borouge 4 comes on stream will further enhance its role, as it will supply large volumes to customers in the Middle East and Asia as well as feedstock to the adjacent TA’ZIZ Industrial Chemicals Zone.

Kallo

Borealis is building a propane dehydrogenation (PDH) plant in Belgium to leverage expected growth in propylene demand in Europe. PDH is a vital process step in the production of propylene from propane. As one of the most important building blocks in the entire chemical industry, propylene is the raw material used to produce polypropylene (PP). The new facility is planned to have a production capacity of 0.7 mn t p.a. of propylene and start-up is expected to take place in 2025.