OMV Petrom unveils Romania's largest private investment plan

Austro-Romanian oil and gas supplier OMV Petrom announced on December 7 it would be investing some €11bn ($12.4bn) in its business between now and 2030, hailing it as the largest private investment plan in Romania's energy sector.

The three main goals of the strategy are reducing the company's carbon footprint, growing its regional natural gas business and general optimisation. At the same time it wants to deliver significant growth in cash flow, provide shareholders with a 5-10% growth in base dividends over the period and strengthen energy security in Romania and the southeast Europe region.

OMV Petrom will set aside 35% of the investment sum for decarbonisation work. Not only will it seek to address emissions from its existing operations, but it also wants to expand the share of gas in its hydrocarbon production mix to 70% and develop positions in low-carbon mobility, biofuels and renewable power, and later hydrogen and carbon capture and storage (CCS).

Regional aspirations

OMV Petrom places significant emphasis on its regional growth plans, which centre around Black Sea gas. Its flagship project here is Neptun Deep project in Romania. The company and its partner ExxonMobil have repeatedly delayed taking a final investment decision (FID), however, because of controversial changes to Romania's offshore law, although Romanian authorities are looking to reverse some of these adjustments.

OMV Petrom now says an FID is expected in 2022-23, and that gas production could start some four years later. The estimated capital expenditure is under €2bn ($2.25bn), and OMV Petrom expects to net some 70,000 barrels of oil equivalent/day of production from its 50% stake in the project. ExxonMobil is set to pass its interest to state-owned Romgaz.

Beyond Romania, OMV Petrom is also progressing the Han Asparuh oil development in Bulgarian waters, adjacent to Neptun Deep, and is preparing to explore Block II off Georgia. It has expressed interest in drilling off Ukraine as well. 

All told, OMV Petrom expects to generate a third of its total clean current cost of supply (CCS) EBIT from these regional growth projects by the end of the decade.

Optimisation and rewards

OMV Petrom plans to cut the share of capital expenditure devoted to its existing, traditional assets to around 45% from 100% at present. In the upstream sector, it wants to maximise economic recovery from mature fields and is targeting production costs of around $7/boe by 2030. It warns that output is expected to decline naturally by 3% by 2025, but should then surge by 50% over the next five years thanks to Neptun Deep's start-up.

In refining, the company expects its utilisation rate to be above 95% over the period, and it is looking to add biofuels production and aromatics capacity to this business. As for its gas and power division, OMV Petrom wants to expand gas sales to 70 TWh by 2030 and scale up renewables to account for 20% of its total power sales.

OMV Petrom's ambition is to more than double clean CCS EBIT by the end of the decade, while maintaining more than a 12% internal rate of return on new traditional and regional gas growth projects. The target return for energy transition initiatives is only 9%.

Besides the 5-10% increase in base dividends each year, the company may also distribute special dividends when market conditions are right, and all some 40% of operating cash flow between 2022 and 2030 is expected to go towards dividends.