* More than 4 bln euros spent on assets in Middle East
* Integrated refining, petchem complex in Ruwais planned
* Aims to meet soaring demand for plastics in China
* Shareholder ADNOC seen as reliable, strong partner
By Kirsti Knolle
VIENNA, June 18 (Reuters) - After years of largely bankingon low-cost Russia for growth, OMV is shiftingattention towards the Middle East as its chemist chief executivechases his vision of making the Austrian oil and gas group amajor supplier of plastics.
OMV boss Rainer Seele has spent more than 4 billion euros($4.5 billion) - 40% of the group's M&A budget until 2025 - foroil and gas concessions in the region, a 15% stake in Abu DhabiNational Oil Co's (ADNOC) refining business and a to-be-formedtrading joint venture with ADNOC and Italy's Eni.
"We want to have a fully integrated business model in AbuDhabi - from the well via the refinery and the petrochemicalsall the way to marketing and trade in international markets,"the chief of Austria's second-largest listed company toldshareholders last month.
OMV traditionally earns its money from producing,distributing and refining oil and gas in Europe. A focus onlow-cost oil and gas fields in Russia - a source of investorconcern due to U.S. and EU sanctions - helped the group get backon its feet financially in recent years and become one of thebest cash-flow generators in the sector.
After fixing a price this month for the purchase of Siberiangas assets from Gazprom, OMV has largely achieved itsRussian expansion plans.
The Russia-led Nord Stream 2 gas pipeline, of which OMV is afinancing partner, could face delays. However, OMV's downsiderisks are limited to the 950 million euros it has committed, ofwhich it has paid 644 million euros so far.
"This is already captured by its discounted valuationrelative to its peers," analysts at Berenberg said in a note.
Seele's new, Middle East-focused strategy stems from a shiftin the environment surrounding OMV's business model, withchallenges created by the politically promoted rise of renewableenergy and increased use of electric vehicles.
Consultancy Wood Mackenzie forecasts that demand for oil indeveloped countries will revert to structural decline next yearand drop by about 4 million barrels per day (bpd) by 2035. Incontrast, it expects demand in developing economies, mainly inAsia, to increase by nearly 16 million bpd in the same period.
The rise in developing-country demand is seen largely drivenby the petrochemicals industry, which uses oil to make theplastics needed for fertilisers, packaging, detergents andclothes, as well as for electric-car parts, solar panels andwind turbines.
This is where Seele gets excited. Refraining from expandinginto renewables like BP and Royal Dutch Shell,the CEO plans to monetise his oil with the expected surge indemand for plastics and also jet fuel, especially in China.
For Seele, the new focus is a journey back to his roots. The58-year-old German holds a PhD in chemistry and started hiscareer as a chemical research scientist.
He has chosen the United Arab Emirates as a base from whichto secure a big piece of the Asian petchem pie, aiming tomaximise profit via the entire value chain.
"What I am always preaching is, hey guys, try to thinkintegrated," he told Reuters when asked why he did not simplybuy into China. "I cannot come up with an integrated businessmodel in Asia if I buy into a petchem unit there. It would be anisolated investment."
The UAE, a strategic investor in OMV since 1994, hasaggressive energy ambitions for the coming decade. It iscooperating with international groups including Shell, Germany'sWintershall DEA and U.S. investment firms KKR andBlackRock to pioneer approaches and technologies.
Last year, the UAE launched a $132 billion capex programmeto become self-sufficient in gas by 2030 and establish itself asan exporter of petrochemical products. It plans to invest $45billion alone into the Ruwais complex, which is located 240 km(150 miles) west of Abu Dhabi, to make it the largest integratedrefinery/petrochemicals facility in the world.
CREATING A "BORDEAUX"
ADNOC Refining plans to spend $1.9 billion annually,according to its five-year business plan. As OMV holds 15%, itsshare would be 285 million euros per year.
A cost optimisation of Ruwais operations will be followed byinvestments to enable the use of different feedstocks and theprocessing of heavier, more sour crude at the site, Seele saidin explaining the plans for ADNOC Refining.
"We will create a Bordeaux," said Seele, a connoisseur ofred wine. "Right now we are only running with Cabernet Sauvignonin Abu Dhabi and we will add some Merlot."
One challenge will be to export to Ruwais OMV's Europeanmodel of bundling refining and petrochemical production inintegrated hubs.
"We are transferring our European refineries now frompredominantly fuel refineries to jet fuel and petchem units,"Seele said. "That's the transformation we have in mind (forRuwais as well)."
To deliver on its goal, OMV is working closely with itssubsidiary Borealis, which partly runs the Ruwais refinery viaits Borouge joint venture with ADNOC. Seele and Alfred Stern,chief executive at Borealis, plan big.
Borouge hopes to give the final go-ahead for theconstruction of a fourth petrochemical complex at the site nextyear, Stern told Reuters. He did not disclose the cost of thenew complex, but said it would be a "multi-billion" decision.
OMV's purchases of a 20% stake in Abu Dhabi’s SARB and UmmLulu offshore oil concessions and a 5% stake in the Ghashaoffshore gas and condensate fields from ADNOC were crucial forgrowth as they secure access to cheap feedstock, Seele said.
OMV also plans to recycle used plastic and convert it intosynthetic crude oil at the Abu Dhabi complex. It is testing thepatented, so-called ReOil technology at home.
"What we see in the market is a clear signal. If we don'tfind a solution to recycle plastics, our polymer business willbe negatively impacted," the CEO said with a view to investors,who want the industry to work harder against climate change.
"At the latest, in 2025 we would like to have a commercialplant."
Analysts have praised OMV's plans, saying major players inthe oil and gas industry may envy the company for the deals withits financially strong shareholder ADNOC.
However, risks remain: The emirate's gas fields have provedchallenging to monetise in the past due to high operating costsand artificially low local prices for the fuel.
"New technologies and development plans can improve this,but the fields still remain relatively difficult," said RobinMills, chief executive at energy consultancy Qamar Energy inDubai.
Another challenge is inadequate infrastructure. The pipelinenetwork needs to be extended, Seele says, at the same timeindicating a solution is under way. "If you identify a problem,solve it."
($1 = 0.8897 euros)(Reporting by Kirsti Knolle; Additional reporting by AlexandraSchwarz-Goerlich; Editing by Dale Hudson and Jan Harvey)
