ADIPEC Energy Dialogue with Alfred Stern, CEO OMV

Very nice to see you. I'm looking forward to our conversation.

Yeah, it's a great question. Actually, OMV started as an oil exploration company in Austria, but that was many years ago. Since then we have moved on quite a lot because the energy demand in this world has continued to increase, and the product that we could find here in Austria was by far not sufficient to fulfill the demand, so we went international. But let me focus a little bit more on the last couple of years because in those years we really went very international. If you look at our business today, we have three business segments: exploration and production, refining and marketing, and our newest segment, chemicals and materials. In exploration and production, over the last couple of years we have added three regions to our portfolio: we started with Russia, we added upstream assets in Abu Dhabi, and we also went to Asia, to Malaysia, and added assets there. In refining and marketing, we added the participation in the ADNOC refinery in Abu Dhabi to our portfolio of refineries in Austria, Germany, and Romania. And last but not least, with our Borealis acquisition last year, we significantly increased our footprint in chemicals and materials, but also added quite a number of locations. We added a lot more production locations in Europe, but we also added joint ventures in North America and activities in Asia, and of course our adventure in Abu Dhabi.

Yeah, Abu Dhabi for us is a key region, it's really important. Our partnership that we have is really about two different key partnerships. Let me start with one: together with Mubadala, they have been a shareholder of OMV for a very long time and our second biggest shareholder. So together with the Austrian state holding company ÖBAG, they are the two biggest shareholders that we have, and that's very important for us because they have been a long-term committed investor and they have been with us for a long time on our journey to become what we are today and part of our success. So that is important. The second piece is really our multiple partnerships with ADNOC, the Abu Dhabi National Oil Company. Over the years we have really grown into many, many partnerships across the whole oil and gas value chain. So we have upstream partnerships with ADNOC, we are a partner with ADNOC in their big ADNOC refinery in Ruwais. We also together are active there in ADNOC Global Trading and Marketing. And then last but not least, we have our petchem activities with Borouge, and that Borouge activity has been growing over the last couple of years and is really quite a successful petchem activity that we have together in Ruwais in Abu Dhabi and globally, with again quite significant growth potentials. And we are, just by the end of this year, will bring on stream our fifth world-scale polypropylene plant that is going to increase the capacity of Borouge by another 10%.

Yeah, I always find it important to take a little bit broader view on this because I think it is important to note that we have found the access to cheap, affordable energy and mobility to be a key driver of wealth generation in this world. GDP growth, more or less there's a linear correlation between energy consumption and GDP growth, and that will continue in the future. There will be more people, and hopefully they will live better lives. But with this we have to expect that there will also be more energy consumption. So we have two opposing objectives here: one, bring the energy that is needed for the growth to the world; on the other side, we must combat climate change and find better ways how to run our businesses. For OMV, there is actually quite a lot of opportunities in this. We have decided to focus mainly on the chemicals and materials growth in the future because we believe that is an important area to actually drive sustainability. What do I mean specifically with this? If you take plastics, for example, you can make cars lighter, and lighter cars use less energy. With our solutions, we can make renewable energy cheaper with our wire and cable solutions or with the encapsulation solutions for both photovoltaic modules. So by providing innovation and technology to reduce the energy consumption and to bring less carbon-intensive energy to this world, this is where OMV sees its core purpose of the future.

I think it's all clear to us that we have waited too long, and the situation that we are in today requires significant acceleration. So setting ambitious targets is a good idea and is much required in order to achieve what we are hoping for. However, on the other side, as industry we are of course responsible to bring those policies into action and make sure we move forward. As I said before, the availability of affordable, cheap energy is critical not just for industry but for the development of society, and hence it will be key that we move forward fast enough on putting renewable energy capacity into place. The energy consumption that we have today is huge, and therefore this will be the key to be successful in this criteria. I really believe that what it requires is a new way of working together between governments, policy sectors, civil society organizations, and business or industry in order to be successful in this. If you want a new contract for more sustainable living, making this happen will be key to be successful in this energy transition.

Yeah, this is actually where we are heading to more chemicals and materials. I think this sector is offering a great possibility not just in terms of growth opportunities, but it is also an enabler for more sustainable living, and this is where we can bring solutions to the energy transition, to the climate change that we so much need. So we see a lot of growth potential in chemicals and materials, and we wanted to use that on the way forward. Now, why is this good for OMV? If you think back some 20-plus years, OMV has been a shareholder in Borealis since the foundation of Borealis. In fact, we have contributed our small petrochemical business back then into Borealis, and we've stayed as shareholder since then because we always believed in the future of this important sector. So we know this company inside out, and that was of course a good starting position. That combined together with the belief in a strong growth potential was the foundation for increasing our shareholding in Borealis. Now, how is that different? I really think if you look now at our chemicals and material activities, in particular our Borealis activities there, we are today already a very active player in chemicals and materials. First half of this year, 2021, about 50% of our operating result came from the chemicals and materials sector. So it's really a big share. Of course that was partly because of the special market conditions that we found, but even under normalized circumstances we should be about 30 to 40% chemicals and materials. So that's great. But not just that, we also have some 7,000 people working in that sector already, we have international production locations, we have an established brand, and we are well known with our customers and in the markets where we are active. And last but not least, we are very strong in innovation and technology, and we have our own technology portfolio. So our thought was: here we have a market segment that will grow in the future, that can make a contribution to more sustainable living, and that we have a strength in, so let's focus on growing that segment. That was really the idea for us to move it forward. And the last one that I want to mention here is what we found: that OMV and Borealis together are stronger in circular economy because, for whatever reason, both companies have started early to develop into their circular economy area.

Yeah, I think it's really a future area, a growth area that we want to capture a significant part of. Now, both OMV and Borealis started very early in this sector and identified that this could be a growth opportunity. So we have been active in circular economy for more than 10 years. And what does that mean? That means that we have actively tried things in our labs, but we have also scaled them up and have been producing and active operationally in those areas. And with this we could gather quite a substantial experience which is helping us to scale it up further. But why is it so important? It's so important because plastic waste is really a valuable resource, and it should not be thrown away. We should use it as a valuable resource, as a feedstock of the future. And this is what we are trying to do here. Now, you take OMV and Borealis together, I think we are one of the few, if not the only company, where already today you can buy commercially chemicals and materials based on renewable feedstock. You can buy materials based on mechanically recycled feedstock, and you can buy chemicals and materials based on chemically recycled feedstock, or with our own technology portfolio that we are using to drive this forward. We have grown this sector by about four times in the last five years, and we are planning to more than triple it again until 2025. So we see this as a big future growth opportunity that can help us to produce our products with less energy and less CO2 footprint. But in addition, it puts a value to plastic waste, and with this plastic waste will no longer go on waste disposals or in the environment because it has a value and we will use it as a feedstock.

Yeah, of course. Mubadala has been a shareholder of OMV for the last 27 years, so it's that long already. And that partnership over such a long time has of course kept evolving and was a key driver for our success and for our development at OMV. It was started with a smaller share, and over time Mubadala increased their shareholding, and they own today 24.9% of OMV. With this, they are the second biggest shareholder, and they are working closely together with our biggest shareholder, the Austrian state fund called ÖBAG, they have 31.5%. So together, those two partners are really instrumental for our success, for our sustainable development in the future. And they've always been great supporters to make sure that we can develop and grow the company into a more promising future. And I hope this will continue like this for a long time, and I'm looking forward to that partnership.

Yeah, I and we are very excited about this ADIPEC. You know, it's not just because after a pandemic everybody is hungry to finally come together with business partners and other people from the industry again and discuss important subjects of the future and identify new partnerships. So that will be very exciting. And because it's so exciting, we will have the biggest participation we ever had at ADIPEC. We will have a very nice stand where we are trying to represent the entire OMV group. So we will participate as OMV, and also together with our two majority-owned companies, Borealis and OMV Downstream. And we will have representation from all three of those companies also at ADIPEC. We will show our capabilities where we have our strengths, and we will participate actively in the whole ADIPEC conference. All of my executive board colleagues will also attend ADIPEC and will also be part of different panels where we will discuss about innovation and technology, where we will discuss about circular economy, and where we will also discuss about diversity and inclusion. And I myself will also be a part of a panel where we will talk about the new normal for demand in our industry. So it will be really a great time. I am really looking forward to meet some of the key partners, but also to meet some of the maybe new future partners.

Thank you very much, Atna. It was great talking to you.