OMV bets 500m euros on exploration and production

Austria’s OMV, the majority shareholder in Petrom, the biggest Romanian company, say that on the long term the group’s strategy is to bolster the weight of the exploration and production unit against that of the refining one.

For Romania, the strategy translates into the earmarking of more than 500m euros in 2010 exclusively for Petrom’s exploration and production operations, out of a budget worth more than one billion euros, but also into the revising of some targets initially announced for the refining business.

“We’re revising our refining strategy amid the falling demand and narrowing margins. At Petrom it makes sense to invest money in exploration and production. For Petrobrazi (the bigger of the two refineries Petrom holds domestically i.e.), we announced a 1.5bn-euro project as part of our strategy for 2010, a project that also included boosting refining capacities. We have this budget under review and it may be cut,” explained Wolfgang Ruttenstorfer, CEO of OMV, without providing any further details.

Romania produces domestically, through Petrom, around half of its oil needs, with the rest being imported. Petrom’s big profits come from the very exploration and production business, while the refining business generates hundreds of millions of euros in losses every year.

For instance, according to Petrom’s reports for 2008, the company spent 18 dollars for each produced barrel of oil that was worth though more than 80 dollars.

Ruttenstorfer specified Romania would not become a secondary market in terms of the group’s interest, though during the London conference OMV organises annually the Austrians focused more on the development of Turkish operations.

“I could say the SE European market is even more important for us than the central one. In Romania, business is good, Petrom is sailing in calm waters and maybe this is why we are not speaking so much about this company. It is in other areas that we’re facing problems,” Ruttenstorfer says.