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Analysis – Austria’s OMV talks Turkey

28 May 2010 19:22 (+01:00 GMT)
Analysis – Austria's OMV talks Turkey

London, 28 May (Argus) — Austrian integrated oil firm OMV aims to cut costs and restructure operations, while putting Turkey at the core of its three-pronged growth plan.

OMV's strategy centres on expansion in three growth regions to 2015 — central Europe, southeast Europe, and Turkey. “Looking at the next 5-10 years it makes a lot of sense for us to go southeast,” chief executive Wolfgang Ruttenstorfer says.

The company expects oil demand in its traditional central European markets to decline by 2pc by 2015. But OMV is pinning its hopes on continued expansion in natural gas demand, which it projects at 13pc in central Europe and 22pc in southeast Europe by 2015. And the firm is eyeing Turkey as its core growth market, where it expects oil demand to grow by 14pc and gas demand by 22pc by 2015.

Building bridges
“In terms of the markets we can reach as OMV, the most interesting is not China or India, but Turkey,” Ruttenstorfer says. OMV sees Turkey as “a bridge to the biggest resource areas” of the Middle East and Caspian. The 31bn m³/yr Nabucco gas pipeline, in which the company holds a 16.67pc stake, is an “important tool that will allow further growth in core markets”, Ruttenstorfer says.

OMV aims to develop upstream projects in resource-holders such as Iraq and Kazakhstan that are close to its key markets. It hopes to source gas for Nabucco from its Pearl project in the semi-autonomous Kurdistan region of northern Iraq. And OMV will supply Turkey with crude from its 35mn bl Komsomolskoye oil field in Kazakhstan, where it expects net production of around 10,000 b/d this year.

The firm seeks a more integrated role in Turkey by gaining access to a local refinery. It is “looking to have more influence” on fuel retailer Petrol Ofisi to further its aims in the country, Ruttenstorfer says, despite shelving plans to raise its 42pc stake in the firm.

OMV is laying the foundation for expansion by restructuring and selling non-core assets. The firm is centralising its upstream project management and has reduced operational expenditure (opex) by €300mn ($371mn) since 2007. OMV aims to cut opex by a further €200mn by 2012, with one-third of savings to be made in refining. Upstream asset sales will include exploration blocks in Russia's Saratov and Komi provinces, while downstream OMV will reduce its refining capacity by 15pc by selling or closing its Romanian subsidiary Petrom's 70,000 b/d Arpechim refinery by 2012.

The company will focus over 50pc of capital expenditure on its upstream unit to 2015. “It should be possible” to maintain hydrocarbon production at 325,000 b/d of oil equivalent to 2015, “but to go beyond that we need acquisitions”, Ruttenstorfer says. “We have a significant amount of financial strength and firepower to pursue our investment goals,” chief financial officer David Davies says.

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