Further writedowns on Austrian oil and gas group OMV’s ailing Samsun gas power plant in Turkey are possible and the facility could be sold, said Manfred Leitner, head of OMV’s downstream division.
OMV this month booked an impairment of 205 million euros ($227 million) at Samsun, where regulatory measures are weighing on margins.
“I wouldn’t rule out further impairments in the future,” Leitner said in an interview late on Tuesday, adding he did not expect more writedowns this year at Samsun, which now has a book value of around half its original 600 million euro price tag.
A sale of the plant is “on the table” and Leitner said he could imagine regional investors being interested in buying it, although no concrete sale process had started.
Under new Chief Executive Rainer Seele, OMV is looking increasingly to Russia as a cheap exploration location in times of low oil prices to balance output disruptions in Libya and Yemen and expensive locations in the North Sea.
OMV signed a memorandum of understanding with Russia’s Gazprom in June to develop areas IV and V of the Achimov formation of the Urengoy oil and gas field in Siberia and the Nord Stream 2 pipeline extension.
OMV hopes to cover a large chunk of the Gazprom deal with asset swaps, but Leitner said OMV had no list yet of assets to offload. Details were due at end-2015 or early next year, but Leitner said he did not expect OMV’s petrol station business to shrink further.
Leitner said OMV could eventually hold just under 25 percent in the Siberian project and a stake in the “low double-digit percentage range” in the pipeline. He said OMV’s output at Urengoy would be more than 40,000 barrels of oil equivalent per day (boe/d).
Analysts estimate OMV’s production there could reach as much as 60,000 boe/d with output possibly starting in around 2020/21. This would compare with OMV’s company-wide production of 307,000 boe/d in the second quarter.
Leitner cast doubt on OMV’s output target of 400,000 boe/d, which it had to postpone as it slashed investment amid the oil price slump. “The 400,000 barrels are not our target any more. We won’t be setting such targets any more,” he said.
Seele, who took the top job at OMV in July, has said he expected refining margins, which boosted second-quarter results, to slip in the second half of the year, a view Leitner echoed.
“Refining margins will not fall dramatically, but they will go down this year,” he said, adding that once a 10 percent overcapacity in European refining was removed, he expected margins to stabilise at around $3-4 per barrel. ($1 = 0.9038 euros)