From gas in Russia to China-bound plastics, Austrian OMV shifts focus for growth

MOSCOW (MRC) -- After years of largely banking on low-cost Russia for growth, OMV is shifting attention towards the Middle East as its chemist chief executive chases his vision of making the Austrian oil and gas group a major supplier of plastics, reported Reuters.

OMV boss Rainer Seele has spent more than 4 billion euros (USD4.5 billion) - 40% of the group’s M&A budget until 2025 - for oil and gas concessions in the region, a 15% stake in Abu Dhabi National Oil Co’s (ADNOC) refining business and a to-be-formed trading joint venture with ADNOC and Italy’s Eni.

"We want to have a fully integrated business model in Abu Dhabi - from the well via the refinery and the petrochemicals all the way to marketing and trade in international markets," the chief of Austria’s second-largest listed company told shareholders last month.

OMV traditionally earns its money from producing, distributing and refining oil and gas in Europe. A focus on low-cost oil and gas fields in Russia - a source of investor concern due to US and EU sanctions - helped the group get back on its feet financially in recent years and become one of the best cash-flow generators in the sector.

After fixing a price this month for the purchase of Siberian gas assets from Gazprom, OMV has largely achieved its Russian expansion plans.

The Russia-led Nord Stream 2 gas pipeline, of which OMV is a financing partner, could face delays. However, OMV’s downside risks are limited to the 950 million euros it has committed, of which it has paid 644 million euros so far.

"This is already captured by its discounted valuation relative to its peers," analysts at Berenberg said in a note.

Seele’s new, Middle East-focused strategy stems from a shift in the environment surrounding OMV’s business model, with challenges created by the politically promoted rise of renewable energy and increased use of electric vehicles.

Consultancy Wood Mackenzie forecasts that demand for oil in developed countries will revert to structural decline next year and drop by about 4 million barrels per day (bpd) by 2035. In contrast, it expects demand in developing economies, mainly in Asia, to increase by nearly 16 million bpd in the same period.

The rise in developing-country demand is seen largely driven by the petrochemicals industry, which uses oil to make the plastics needed for fertilisers, packaging, detergents and clothes, as well as for electric-car parts, solar panels and wind turbines.

This is where Seele gets excited. Refraining from expanding into renewables like BP and Royal Dutch Shell, the CEO plans to monetize his oil with the expected surge in demand for plastics and also jet fuel, especially in China.

For Seele, the new focus is a journey back to his roots. The 58-year-old German holds a PhD in chemistry and started his career as a chemical research scientist.

He has chosen the United Arab Emirates as a base from which to secure a big piece of the Asian petchem pie, aiming to maximize profit via the entire value chain.

"What I am always preaching is, hey guys, try to think integrated," he told Reuters when asked why he did not simply buy into China. "I cannot come up with an integrated business model in Asia if I buy into a petchem unit there. It would be an isolated investment."

The UAE, a strategic investor in OMV since 1994, has aggressive energy ambitions for the coming decade. It is cooperating with international groups including Shell, Germany’s Wintershall DEA and US investment firms KKR and BlackRock to pioneer approaches and technologies.

Last year, the UAE launched a USD132 billion capex program to become self-sufficient in gas by 2030 and establish itself as an exporter of petrochemical products. It plans to invest USD45 billion alone into the Ruwais complex, which is located 240 km (150 miles) west of Abu Dhabi, to make it the largest integrated refinery/petrochemicals facility in the world.

As MRC wrote before, in October 2018, OMV and Gazprom signed a "Basic Sale Agreement" which foresees a potential acquisition of a 24.98% interest in the Achimov IV and V phase development in the Urengoy gas and condensate field by OMV for a purchase price to be negotiated in good faith.

OMV is producing and marketing oil and gas, innovative energy and high-end petrochemical solutions – in a responsible way. With Group sales of EUR 20 bn and a workforce of around 20,700 employees in 2017, OMV Aktiengesellschaft is one of Austria’s largest listed industrial companies. In Upstream, OMV has a strong base in Romania and Austria and a balanced international portfolio, with the North Sea, the Middle East & Africa and Russia as further core regions. 2017 daily production stood at approximately 348,000 boe/d. In Downstream, OMV operates three refineries with a total annual processing capacity of 17.8 mn tons and more than 2,000 filling stations in ten countries as of year-end 2017. OMV runs gas storage facilities in Austria as well as in Germany; its subsidiary Gas Connect Austria GmbH operates a gas pipeline network in Austria. In 2017, gas sales volumes amounted to 113 TWh.
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MOSCOW (MRC) -- Zhong Tian He Chuang, a joint venture of Sinopec and China Coal Energy Group, is in plans to brought on-stream its polypropylene (PP) plant following an unplanned outage, as per Apic-online.

A Polymerupdate source in China, informed that the company is likely to resume operations at the plant in end-June, 2019. The unit was shut on June 11, 2019 owing to technical issues.

Located at Ordos in Inner Mongolia, China, the plant has a production capacity of 350,000 mt/year.

As MRC reported before, in September 2018, Sinopec Corp joined a group planning to build an oil refinery in Alberta, an enterprise that would strengthen demand for the Canadian province's heavily discounted crude.

Sinopec Corp. is one of the largest scale integrated energy and chemical company with upstream, midstream and downstream operations. Its principal business includes: exploring, developing, producing and trading crude oil and natural gas; producing, storing, transporting and distributing and marketing petroleum products, petrochemical products, synthetic fiber, fertilizer and other chemical products. Its refining capacity and ethylene capacity rank No.2 and No.4 globally. Sinopec listed in Hong Kong, New York, London and Shanghai in August 2001. Sinopec Group, the parent company of Sinopec Corp., is ranked the 5th in Fortune Global 500 in 2012.
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MOSCOW MRC) -- French oil and gas major Total aims to complete repair works on the PLIF pipeline and restart its 102,000 barrels-per day Grandpuits refinery by mid-July, company documents show, reported Reuters.

Production was suspended at the refinery in February after a leak on the Ile-de-France Pipeline (PLIF) cut crude deliveries to the facility.

Total is carrying out maintenance works on the pipeline and cleanup operations on surrounding farms following the spill, while French authorities are analyzing the cause of the incident before any approval of the restart.

The company said in documents, presented during a public consultation with residents around the area of the spill, that initial investigations showed that the leak was caused by a degradation of the pipe.

It said defaults were found in several areas along the pipeline and all the repairs would be carried out and would need to be approved by various authorities before a restart which it estimated at around mid-July.

As MRC wrote earlier, in December 2017, Total inaugurated the new units at its Antwerp integrated refining & petrochemicals platform, which had progressively started up in the previous few months.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
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MOSCOW (MRC) -- Kuwait’s state refiner KNPC said seawater supply used to cool production units at its Mina Abdullah oil refinery was back to its natural levels after a leak earlier in the day, reported Reuters.

KNPC added in a tweet that work was still under way to restore the usual refining capacity rates of Mina Abdullah, which is expected to be in the next hours.

As MRC informed before, KNPC said on Wednesday that refining operations at its Mina Abdullah oil refinery had been affected by a cut in seawater supply, which is used to cool production units in the plant.

We also remind that in November 2018, Kuwait Petroleum Co prepared a study to transform its al-Zour refinery into a commercial one to increase its profitability.
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MOSCOW (MRC) -- Jamaica’s government said it already owns the 49% stake in a refinery on the island formerly held by Venezuelan state oil company PDVSA, after the South American country’s opposition requested it not expropriate the shares, reported Reuters.

Jamaica’s Senate in February passed legislation clearing the way for the government to acquire the 49% stake in the 36,000 barrel-per-day Petrojam refinery that PDVSA acquired in 2006, part of late leftist President Hugo Chavez’s energy diplomacy efforts in the Caribbean.

But over the weekend, an ad-hoc PDVSA board appointed by opposition leader Juan Guaido sent Jamaica a letter asking that it halt the expropriation process. The other 51% of the shares were already owned by the Jamaican government.

Robert Nesta Morgan, parliamentary secretary for the office of Jamaican Prime Minister Andrew Holness, said on Monday that the office received the letter and sent it to the attorney general’s office for "advice."

"The shares however are now owned by Jamaica," Morgan said in a statement, adding that the Jamaican government placed funds for compensation for the shares an escrow account, and there was a provision for parties to submit claims for the funds. He did not say how much money was placed in the account.

Guaido, the leader of the opposition-controlled National Assembly, in January invoked Venezuela’s constitution to assume an interim presidency, arguing President Nicolas Maduro’s 2018 re-election was illegitimate. He has since been recognized by dozens of countries as Venezuela’s rightful leader.

He appointed the ad-hoc board in part to protect PDVSA’s assets abroad. Maduro calls Guaido a puppet of the United States seeking to oust him in a coup, and remains in control of most state functions, including PDVSA’s operations within Venezuela.

Jose Ignacio Hernandez, Guaido’s overseas legal representative, said he and PDVSA ad-hoc board chair Luis Pacheco had "already requested that any compensation should be negotiated with the legitimate government."

We remind that, as MRC informed before, in late February 2019, Houston-based Citgo Petroleum slowed work on an overhaul of its 235 Mbpd Aruba refinery due to a lack of financing stemming from US sanctions on Venezuela's state-run PDVSA.
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