OMV

OMV has targets to reduce the scope 1 and 2 emissions intensity of its upstream exploration and production operations by 60% by 2025, and of its oil refining operations by 20% by 2025, compared to 2010 levels. The upstream target is nearly sufficient to align with the rate of emissions reduction required by the company’s 1.5°C pathway. However, the target for its refining operations remains inadequate.

The company’s target to reduce its scope 3 emissions intensity by 4% between 2010 and 2025 was achieved in 2019. OMV is now targeting a reduction of 6% by 2025 compared to 2010. OMV should aim for a more ambitious reduction in scope 3 emissions, given that scope 3 emissions accounted for nearly 91% of its total emissions in 2019.

OMV’s locked-in scope 3 emissions from its upstream activities are expected to exceed its 1.5°C carbon budget by 13% between 2019 and 2050. This is based on OMV utilising all its remaining reserves at an annual rate based on forecast production from existing and approved fields. Therefore, to stay within its 1.5°C carbon budget, OMV should plan a managed decline in its oil and gas production. In contrast, OMV is currently continuing exploration for new reserves which could lead to it exceeding its carbon budget even further. According to the International Energy Agency, no new oil and gas fields should be approved under a 1.5°C scenario.

In 2019, OMV invested 0.4% of its CapEx in low-carbon and mitigation technologies, with a marginal increase to 0.8% in 2020. The company plans to invest up to EUR 1 billion (USD 1.184 billion), or approximately EUR 200 million (USD 237 million) per year, in innovative, sustainable solutions between 2021 and 2025. If this ambition is realised, it would constitute 7.3% of OMV’s planned organic CapEx. Nevertheless, OMV’s planned levels of low-carbon CapEx still remain far below the sectoral expectation for oil and gas companies to dedicate 77% CapEx to low-carbon and mitigation technologies to align with a 1.5°C scenario.

Innovation in areas such as CCUS, hydrogen production and circular economy are at the heart of OMV’s climate strategy. The company states in its Capital Market Story 2021: “We will leave familiar paths to develop fundamentally innovative low-emissions technologies.” However, in 2020 only 21% of the company’s R&D spending was dedicated to low-carbon innovation, which is a small increase from 18% in 2019. The sectoral expectation for oil and gas companies is to dedicate 77% of R&D to low-carbon innovation. This is particularly relevant for OMV whose climate strategy is focusing on less mature technologies such as hydrogen and CCUS rather than mature technologies such as solar and wind.

OMV has completed a climate scenario analysis. This scenario analysis has informed strategic decisions such as a EUR 2 billion divestment from some upstream and retail assets, a goal of increasing gas from 57% of upstream production in 2019 to more than 65% in 2025, and the decision to become the majority shareholder in the petrochemicals and plastics producer Borealis.

However, OMV’s scenario analysis has not yet been translated into a low-carbon transition plan aligned with a 1.5°C scenario. For example, the company is using an internal carbon price of EUR 25 (USD 30.5) per tonne of CO2 equivalent (tCO2e) until 2025 and 35 EUR (USD 42.7) tCO2e thereafter. The company is currently reviewing its internal carbon pricing and should set a higher price, given the International Energy Agency’s (IEA’s) expectation that advanced economies’ carbon price will reach USD 75 tCO2e by 2025 under a 1.5°C scenario. Additionally, OMV aims to process nearly 200,000 tonnes of feedstock for biofuels by 2025, but this is equivalent to only 0.8% of OMV’s current refining capacity.

In 2020, OMV established a trade association review process, but so far it has only reviewed 12 key associations. OMV’s current review process only requires associations to publicly support the Paris Agreement and nationally determined contributions (NDCs). OMV should improve this process to not only look at the top-line positioning of trade associations on climate change but also consider their lobbying activities.

For example, the company considers itself fully aligned with the International Association of Oil & Gas Producers (IOGP). However, IOGP is reported to have lobbied against the 100 gCO2e/kWh threshold for electricity generation in the European Union Sustainable Finance Taxonomy.

By 2025, OMV aims to reduce its scope 1 and 2 emissions intensity by 60% for its exploration and production operations and by 20% for its refining operations. It also has a target to achieve zero routine flaring and venting by 2030 and to be carbon-neutral in its operations (scope 1 and 2) by 2050. OMV is also targeting a 6% reduction in scope 3 emissions intensity in 2025 compared to 2010.

OMV will be investing EUR 1 billion (USD 1.184 billion) in innovative sustainable solutions between 2021 and 2025. This includes a EUR 200 million (USD 237 million) investment in biofuel production and EUR 12.5 million (USD 14.8 million) investment in green hydrogen. The company is increasing its focus on gas and chemicals, as well as on developing hydrogen and carbon capture and storage technologies, while working towards a circular economy.

To develop its low-carbon business, OMV established a New Energy Solutions and Carbon Management Business Unit in 2019. Nevertheless, OMV’s remuneration for executives still indirectly incentivises growth of fossil fuel volumes through net income, net present value and free cash flow metrics. Only 10% of executives’ long-term incentive plan renumeration is linked to the achievement of emissions reductions.

OMV’s scope 1 and 2 emissions intensity saw a marginally increasing trend between 2014 and 2019, whilst scope 1, 2 and 3 emissions intensity remained stable. The company’s climate credibility has also been called into question through reports stating that it has investigated and monitored climate activists in Austria and New Zealand.

OMV’s plans to develop low-carbon businesses is largely focused on less mature technologies. Furthermore, the company only invested about 21% of its R&D spend and about 0.8% of its CapEx in low-carbon technologies in 2020. The company also lacks a crucial target for scope 3 emissions reduction.