Energy transition – OMV boss Rainer Seele warns: “Friends should not threaten one another”

Oil has fueled the economy for many decades. From truck transport, car and air traffic, through industrial plants and factories to the generation of electricity. For a long time, a world without oil was inconceivable. But that is now changing. The raw material has gone from being the darling of the masses to an undesirable environmental sinner. In an interview, OMV boss Rainer Seele explains how an oil company reacts to this and what the solution is:

“Wiener Zeitung”: Mr. Seele, easily accessible oil wells have long been exploited, oil has lost its image and is a synonym for global warming and environmental pollution. Is the oil age really coming to an end now?

Rainer soul: The Paris climate goals and their implementation in Austria’s climate policy point in a clear direction: We must prepare ourselves for the fact that oil will be replaced by new forms of energy. But oil will remain with us in a few other areas. In the distant future we will no longer burn oil as an energy product, but we will use it as a raw material. The raw material can be used to manufacture high-quality products with a long service life, especially in the chemical sector. The demand will even increase here. So we are preparing for a low-combustion oil age.

Was there a moment when you realized that things couldn’t go on like they did before, that oil in this form had no future?

Three developments have shaped me very strongly. On the one hand, the Fridays for Future initiative. Here, climate change was defined for the first time as a challenge for the future to which we must seriously respond. The financial markets are also clearly calling for more environmental protection. And third, the automotive sector is changing. The European auto industry has opted for electromobility. This will lead to significantly lower fuel consumption and, in the long term, fewer filling stations.

The world’s largest asset manager Blackrock relies on climate protection, insurance companies no longer insure coal-fired power plants. What role do capital markets play in climate change?

The financial markets are one side, but consumer behavior must also change. If society participates, this is also reflected in the financial markets.

The exit from fossil energy is very painful for many energy companies, some are now even going to court. RWE is suing the Netherlands for phasing out coal, Vattenfall is suing Germany for phasing out nuclear power. Does OMV also want to claim damages?

No, I don’t see any reason to do so at the moment. Governments must of course define a transition so that companies can adapt to the new situation. But everyone has known about the change in climate policy for a long time. Anyone who has still not changed their investment behavior due to these changed framework conditions should not complain that they have made a bad investment decision.

In their lawsuits, the energy companies rely on the two-decade-old Energy Charter Treaty, which protects all existing energy investments. Should the EU countries get out of the treaty?

The countries have to decide that for themselves, so I don’t want to make a recommendation.

Less oil and gas production, but the production of biofuels, the 3.9 billion dollar takeover of the plastics manufacturer Borealis. We are currently experiencing the greatest change in the course in OMV’s history. OMV was once called the Austrian Mineral Oil Administration. Is that still true?

Today OMV is a brand in itself. The three letters stand for the quality and, for the services of the company, which also contribute to a high standard of living in Austria. In the future, we will increasingly see ourselves as a chemical company that invests in the refinement of raw materials. In addition, environmentally friendly processes will be a technology focus at OMV. Nevertheless, I will continue to like the name OMV in the future. The company name remains.

So no OCV for the Austrian chemical administration conceivable?

(laughs) No. The letters remain. OMV is no longer an abbreviation, but a brand. But we can agree that the O still stands for Austria.

There are many countries that are very dependent on oil. One of them is Ecuador. The country once made the proposal to leave its reserves in the Amazon region untouched if the world population makes up for the loss financially. Should countries receive compensation when they are ready to stop exploiting their resources?

Just as we discussed this with companies earlier, these countries too have to adjust to a changed world. I can only recommend these states that they also invest in diversification. We will need the oil for a while and will also sell it. I think we will still find a global oil market in the next five to ten years. But then the demand for oil will decrease. I would understand the suggestion if we abruptly say that we will stop buying oil from tomorrow. That’s not the case.

The construction of the Nord Stream 2 Baltic Sea gas pipeline is very controversial. Most recently, the US threatened sanctions. More than 18 companies then withdrew from the project. OMV invested 730 million euros in Nord Stream 2. Will it be finished?

I hope so. This project is of great importance for the security of supply of the European gas market, it is therefore the decision-making responsibility of Europe. We have had a deep transatlantic friendship with the USA for decades. And friends shouldn’t threaten each other.

Fridays for Future made the head of the OMV Group rethink.  - © AFP via Getty Images
Fridays for Future made the head of the OMV Group rethink. – © AFP via Getty Images

The gas pipeline connects Germany with Russia. In Russia, the opposition is currently being persecuted more than ever, says the Lithuanian foreign minister. In his opinion, the project should therefore be stopped until the Russian parliamentary elections in September. What do you make of it?

In Europe we have clear rules of the game that are based on consensus. The concerns of smaller member states must therefore be taken into account. As a connecting country for Nord Stream 2, Germany has a clear position. Political dialogue has to be conducted and persuasion has to be done.

OMV was about to acquire a stake in the Russian gas field Achimov. But then the negotiations were postponed until 2022. What was the reason?

We suspended negotiations in the course of our acquisition of the majority stake in Borealis. That was a financial challenge that fortunately we overcame well last year. We will now see whether we can find an agreement on Achimov next year; the gas field remains an option in our portfolio.

Does that mean you still have to come to an agreement financially?

Yes, we have to agree on the purchase price with Gazprom.

How likely is a purchase of the gas field?

I can only say that if we seriously address Gazprom again. We haven’t seen each other in person for a long time. It must have been a year since I last flew to Russia.

Do you have any scenarios of how much the demand for oil will change in the next 30 years? How high will it go back?

As a result of the corona pandemic, oil demand fell by around 8 percent to less than 100 million barrels a day. We assume that the pre-Corona level will return in the next one or two years. After that, it depends on how individual countries will react to the climate agreement. Some future analyzes show that in 2040 we will still need 50 million barrels of oil a day. A substantial proportion then goes in the direction of raw material processing, and not in raw material incineration.

So the demand for oil will slowly decline. What does the new age look like?

Renewable energies will gain significantly in importance. Hydrogen in particular can trigger an industrial revolution. Not only as an energy source, but also in all chemical processes. From the fertilizer sector to the steel industry.

The geologist Frank Melcher from the Montanuni Leoben recently said in the “Wiener Zeitung” that Europe is making itself dependent on China by expanding renewable energies. Most of the metals needed for wind power, solar power and hydropower are mined in China. How should you deal with it?

This is a very important point, especially when it comes to battery manufacturing. The dependency we feel with oil and gas is one where we have many possible sources on our earth. We don’t have that with rare earths. The automotive industry, for example, has to think about how to secure supplies through long-term contracts.

OMV relies on recycling in the plastics sector. How much of the material can be recycled?

There are two types of recycling, mechanical and chemical. With mechanical recycling, around half of the plastic waste can be turned back into a plastic product. However, the quality of the product is limited; it will not produce a dashboard for a car. If we want full recovery in the plastics sector, there is no way around chemical recycling. We can also use it to recycle additional plastic waste and thus increase the recycling rate. We bet on that.

But that is very energy-consuming …

You are right, recycling uses energy to turn the plastic back into a high quality synthetic oil. But the alternative would be to dump plastic waste or to incinerate it and use crude oil again. In comparison, recycling is much more climate-friendly. We save up to 45 percent of the CO2Emissions. If we recycle with renewable energies in the future, we will get even more CO2-Save emissions.

Can the CO2-Emission cannot be prevented at all?

You have to put that in relation. We produce plastics with a long lifespan, such as plastic pipes for the sewage system. They stay underground for 50 years, then you take them out, recycle them, and then they last 50 years again. It is also about preventing mountains of rubbish. The demand for plastics is increasing massively. They are used in the construction of electric cars to reduce weight and thus energy consumption. With recycling, we prevent nature from being polluted with too much rubbish.

Where do you see OMV in ten years?

Our mainstay will be in the chemical sector. I emphasize: chemistry and not plastics. We will have a high level of chemical diversification. And we will strive for a backward integration of the refineries, with ever lower CO2-Ejections. When it comes to oil and gas production, we will increasingly be a gas company in the future. Now we’re still talking about oil and gas, at some point it will only be gas.

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