Refining activity helps OMV profit

The Austrian oil company that is 20 per cent owned by the Abu Dhabi Government sees net earnings more than double to ?338 million.

A recovery in the oil-refining business boosted second-quarter profit at OMV, the Austrian oil company that is 20 per cent owned by the Abu Dhabi Government. OMV is the latest in a string of major oil companies, including BP, Shell and ExxonMobil, to benefit from an easing of the refining industry's worst downturn in decades. Improved profits on each barrel of crude oil processed into fuels boosts the outlook for Abu Dhabi's own substantial investment in domestic refineries and chemical plants.

Refining margins "proved to be an important driver that enabled the refining and marketing business to return to a robust results contribution", said Wolfgang Ruttenstorfer, the chief executive of OMV. Overall, the company's net profit more than doubled to ?338 million (Dh1.63 billion), helped also by higher oil prices. OMV said it made 99 US cents on every barrel it processed in the second quarter compared with 14 cents in the same quarter of last year. In all of last year, the company made an average profit of only 2 cents per barrel.

Just two years ago, refiners routinely recorded profits close to $20 a barrel, but the combination of the financial crisis and immense new production capacity in the Middle East and Asia crushed profits. A number of oil companies in Europe and the US shut down refineries last year to stem losses. OMV's second-quarter refining earnings, minus the cost of replacing inventories, swung to a ?120m profit from a ?103m loss in the same quarter last year.

OMV cautioned, however, that "the sustainability of this development remains to be seen since a lot of European production capacity underwent maintenance in the [second quarter], causing a favourable effect on margin levels". The refining business pushed up second-quarter headline profit figures at a number of oil companies including BP, where refining profit tripled, and ExxonMobil, where earnings from refining and chemicals plants more than doubled.

The results are a turnaround from six months ago, when poor refining results were the main drag on last year's balance sheets. Most analysts expect margins to remain low but stable in the next three years, pushed up by the economic recovery but capped by the continuing addition of refineries in China, India and the Gulf countries. Margins for producing transport fuels such as diesel and petrol would be "modestly stronger" next year, analysts at Bank of America Merrill Lynch said in a note released yesterday.

"The refinery sector is still far from experiencing a significant period of tightness," the analysts wrote. "Refinery utilisation rates will rise in 2011 but remain low by historical standards." [e-mail]