Caught in between the war in Ukraine and the green energy transition, OMV Petrom committed to investing more than 11 billion euros in the next years. The CEO OMV Petrom told us the company believes natural gas is crucial for both Romania’s energy transition and energy security. “Romania has an enormous potential and with the huge influx of funding accessible through the Recovery Plan and the Modernization Fund we’ll be able to drive the energy transition and generate economic growth”, said Christina Verchere.
What is your view about what can be done in order to accelerate all of the energy developments and financing lines in Romania and the EU as a whole, in order to ensure our energy independence from Russian supplies?
I’ve been working in the oil and gas sector for almost 30 years, and I don’t remember ever seeing such volatility and uncertainty in our sector. It’s a combination of factors that led us here, starting with the need for cleaner energy, the supply-demand unbalances triggered by the post covid economic recovery and culminating with the war in Ukraine.
It is clear now, with the conflict in Ukraine showing no sign of a quick resolve, that the importance of domestic production, of diversification of sources and the reliable supply chains are paramount for Europe in its struggle to lower the dependence of the Russian oil and gas.
In order to reach the above, we need the right mix of private and public investment, predictable and stable legislation, and the political will to pursue it. Romania has an enormous potential and with the huge influx of funding accessible through the Recovery Plan and the Modernization Fund we’ll be able to drive the energy transition and generate economic growth.
What is the current agenda regarding the next steps of Neptune Deep investments?
Neptune Deep looks to address energy security, energy transition and economic development for Romania and is the central piece of our strategy to a lower carbon future. We are committed to invest up to 2 billion euro in this project, out of a total of 11-billion-euro investment plan to transform our company to meet both environmental targets and the energy needs of Romania.
In the upcoming period, we will analyze the final content of the Offshore Law and its impact on the Neptune Deep project. In any project of such scale, the final investment decision considers a series of economic, fiscal and market factors. The economic viability of the investment depends on key factors and on their stability for the duration of the project.
How is OMV Petrom changing gears and speeding up investments, in the light of the recent conflict in Ukraine?
We are at full speed where we can control a particular project. At the end of 2021 we launched our transformation strategy for a low-carbon future, for which we put forward investments of 11 billion euros for the next 9 years. We focus on natural gas – as a key enabler for energy transition – and on developing a greener portfolio that includes renewables, biofuels, hydrogen, and electric mobility. Over a third of our investments will support the shift towards low and zero carbon business. We aim to reach net zero operations by 2050.
We already started investments in specific projects, and we look forward to announcing their progress in the future.
What will be the role of gas in the Romanian and regional approach, in the next period?
We believe natural gas is crucial for Romania’s energy transition and to ensure energy security. It has a critical role in mitigating the volatility of renewable capacities – which are expected to increase, while ensuring cleaner power production. It’s also a solution for decarbonizing the transportation sector, especially long-distance transportation, by using LNG or CNG.
The inclusion of gas in the EU Taxonomy shows its potential to contribute to a just transition in Europe. Fortunately, Romania has access to the significant natural gas reserves in the Black Sea. Development of the Black Sea gas, not only in Romania, but also in Turkey, Bulgaria and Georgia, is a solution for alternative gas sources.
Where and when do you see the role of gas stopping and the role of hydrogen starting, in our future, also having in mind ‘Fit for 55’ and the Green Deal? How should we accelerate the green transition, by what measures?
In Romania, natural gas represents approximately 30% in the primary energy mix and it will continue to play a significant role in the next decade.
Gas demand is expected to grow by 20% by 2030 compared to 2019, supported mainly by new gas-fired power generation capacities coming online, as well as gradual increase in household demand. Post-2030, domestic natural gas consumption is estimated to decrease, as lower operating rates for gas-fired power plants are forecast, while the share of renewable sources in the electricity mix increases.
However, in our view, gas will continue to play a key role in the Romanian energy system through 2040, with increasing demand for hydrogen production. As for hydrogen, the demand in Romania is expected to grow significantly by 2040. We intend to capture this opportunity, by looking into hydrogen obtained from natural gas, blue or turquoise, but also into hydrogen produced using renewable energy.
How did the war in Ukraine affect our energy markets and when, in your view, and how can the markets calm down and come back to pre-crisis levels?
The war in Ukraine has steepened the crisis that followed the removal of lockdowns and shed light on Europe’s dependency on the Russian sources, both for oil and gas. While companies started to shift towards alternative sources, energy prices, that were already up following post covid economic recovery, increased even higher reaching 8 years records. In addition, we also see extremely high volatility.
When energy prices are high, everybody is impacted – from consumers to the economy in general and to businesses. High prices come with increased costs and regulatory uncertainty, which no business wants to see.
It is a complex environment that shows once again how fundamental it is to develop a nation’s own resources and the importance of diversified sources and interconnection.
What is OMV Petrom’s approach regarding helping Ukraine and CSR actions, after the war in Ukraine started?
The war in Ukraine has generated a humanitarian crisis as never seen in Europe in the last 75 years. Since the beginning of the conflict in Ukraine we joined the public efforts for helping the Ukrainian refugees either directly, through our people in the filling stations or by supporting flagship organizations such as UNICEF, Romanian Red Cross, the Foundation for Civil Society Development and the Foundation for SMURD.
More than 1 million euros were allocated to these organizations to support assistance activities at the border as well as integrated services, including family reunification and restoring family links, information and counseling, psychological therapy and legal advice.
How about the change in strategy and the new sustainability pillars that OMV Petrom follows?
Sustainability is fully embedded in our 2030 strategy. Climate change is one of the most important global challenges and we support the goals set forth by the Paris Climate Change Agreement. Mitigating climate change is a strategic priority for our business, and we are committed to be part of the solution for the transition to cleaner energy.
Our long-term goal is to achieve net zero operations by 2050. By 2030, we target to reduce Scope 1 to 3 intensity emissions by about 20% compared to 2019. To achieve this, we plan to invest approximately 35% of the total investment into low and zero carbon new businesses and for these businesses to generate 15% of our profit by 2030. Thus, we are starting the transformation of our company to a lower carbon future.
And we can only do that by investing, by enabling innovation and modern technologies and by equipping our people with the right skills for the future.
When talking about the future of energy, we have already started the journey. We are looking to bring cleaner solutions for mobility to our customers, and to fuel planes with sustainable aviation fuel. We want to use agricultural waste to make second generation renewable fuels and to invest in photovoltaics, as a major source of clean energy. And as we go through this transition we need energy security of the traditional energy sources. The offshore gas production is ticking all the right boxes – it underpins energy security, it is cleaner and brings economic prosperity to Romania.
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This interview first appeared in the printed edition of Energynomics Magazine, issued in June 2022.
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