Hello, and welcome to OMV Group's Conference Call. You should have received a presentation by e mail. However, if you do not have a copy of the presentation, the slides and the speech can be downloaded at www.omv.com. Simultaneously to this conference call, a live audio webcast is available on OMV's website. And at this time, I would like to refer you to the disclaimer, which includes our position on forward looking statements.
These forward looking statements are based on beliefs, estimates and assumptions currently held by and information currently available to OMV. By their nature, forward looking statements are subject to risks and uncertainties that will or may occur in the future and are outside the control of OMV. Therefore, recipients are cautioned not to place undue reliance on these forward looking statements. OMV disclaims any obligation and does not intend to update these forward looking statements to reflect actual results, revised assumptions and expectations, future developments and events. This presentation does not contain any recommendation I would now like to hand the conference over to Mr.
Florian Greger, Head of Investor Relations. Please go ahead, Mr. Guggen.
Good morning, ladies and gentlemen. Welcome to OMV's earnings call for the Q4 2020. With me on the call today are the entire OMV Executive Board and Alfred Stern, the COO of Borealis. Rainer Selle will walk you through the highlights of the quarter and give you an update on some of our strategic priorities. And after that, Alfred will give you more details about Borealis.
Following the two presentations, we are happy to answer your questions. And without further ado, I will hand it over to Rainer.
Yes. Thanks, Lauren. Good morning, ladies and gentlemen, and thank you for joining us. As usual, my presentation today will include the 4th quarter results, our dividend proposal for the business year 2020 and the outlook for this year. Additionally, I will give you an update on our divestment program and on our 2025 strategic directions.
We are currently working on a full strategic update, which we plan to present to you this summer at our Capital Markets Day. Following my presentation, I will invite Alfred to go to give you some insights into the Borealis business. The Q4 of 2020 was yet another challenging quarter for our industry, albeit with a more supportive macro environment quarter on quarter. Upstream significantly improved on the back of higher realized oil and gas prices and the resumption of production in Libya. While still impacted by a weak refining margin, Downstream benefited from the improved performance of Borealis and the full consolidation of its business into our results since the end of October.
Let me start by providing a brief review of the Economic environment. Despite the ongoing oil price recovery at $44 per barrel, Brent was Only 3% higher quarter on quarter and still 30% lower year on year. While the price Fell to $36 per barrel by end of October on the return of Libyan production. Uncertainties surrounding the U. S.
Election and Growing pessimism regarding oil demand, Brent finished the year at over $50 per barrel. The upward momentum was driven by optimism regarding the coronavirus vaccine and economic stimulus measures. European gas prices increased substantially at €14 per megawatt hour Central European gas prices were 57% higher than in the previous quarter and up 6% compared to the same quarter of 2019. The substantial increase was driven by a solid demand supported by cold weather and the reduced LNG supply into Europe due to strong demand in Asia. At $1.7 per barrel, the European refining indicator margin rebounded from the very low level recorded in the 3rd quarter.
However, it was still 66% below the Q4 of 2019. The improvement was driven by higher jet cracks, Partly offset by the increase in the Brent price and weaker demand following tighter restrictions in Europe. Ethylene and propylene margins were at the similar level to the Q4 of 2019, but slightly below the Q3 of 2020. Despite the unusual tight markets towards year end, when spot prices traded above contract prices in some periods, C2C3 margins went under pressure as the rise in naphtha prices outpaced The increase in contract prices in December, benzene and butadiene margins improved significantly compared to the 3rd quarter, but remained below the level of the Q4 2019. Our Clean CCS operating result rose sharply by 65 percent to €524,000,000 versus the 3rd quarter on the back of substantially improved upstream and very strong Borealis performance whose results have been fully consolidated since the end of October.
However, the group's results Excluding net working capital effects of €830,000,000 demonstrating the strength of our integrated portfolio. Building on our strong financials, we delivered on our progressive dividend policy. We will propose a dividend per share of €1.85 for the business year 2020 to the Annual General Meeting. This is an increase of €0.10 versus was 7% lower year on year, primarily due to lower production level in Libya and reduced oil demand. The production cost came down again from the Q3 to below $7 per barrel.
In downstream, our refineries in Europe ran At 81% utilization despite maintenance activities and strict lockdowns across Europe. This was significantly above the European average of 68%. Borealis showed an excellent performance quarter on quarter with higher polyolefin sales volumes in Europe and Asia. The Q4 was a milestone in executing our strategy. On October 29, We closed the acquisition of an additional 39% share in Borealis.
OMV now owns a controlling interest of 75% in the company. Alongside the Borealis acquisition, we took further significant steps in our previously announced €2,000,000,000 divestment program. In December, we signed the sales agreement of the German OMV retail network and the divestment of the upstream business in Kazakhstan. Both transactions are expected to close in 2021. Following our goal of reducing the carbon intensity of our product portfolio, We decided to invest €200,000,000 into co processing, the simultaneous conversion of biomass and fossil feedstock at our Schwekers refinery in Austria.
This will allow OMV to transform biomass obtained from vegetable oil or waste into up to 160,000 tonnes of biodiesel starting in 2023. OMV's annual carbon footprint will therefore further decrease by up to 360,000 tonnes. In December, together with Daimler Truck, Iveco, Volvo and Shell, we committed to work together to help create The conditions for the mass market rollout of hydrogen trucks in Europe. We believe that hydrogen is essential for the complete decarbonization So let's now turn to our financial performance in the Q4 of 2020. Our clean CCS operating result decreased by €257,000,000 versus the prior year quarter due to a decline in upstream of €275,000,000 caused by the adverse market environment.
Downstream earnings were down slightly versus the prior year quarter. The negative impact of maintenance activities at our refineries And lower demand was almost entirely compensated by a positive hedging contribution as well as the strong performance of Borealis and its full The claim CCS tax rate decreased to 33%, which was 10 percentage points lower than year on year, Driven by a proportionally lower upstream contribution in particular from countries with high tax fiscal regimes. Clean CCS net income attributable to stockholders decreased by 29% to €219,000,000 Clean CCS earnings per share was 67% cents sorry. With the closing of the Borealis transaction, OMV realized a step up in the valuation of the previous 36% share in Borealis of around €1,300,000,000 and tax synergies That raised OMV's equity position by around €300,000,000 via deferred tax assets and further effects. As a result, net income rose strongly to €1,900,000,000 Let me now discuss the performance of our 2 business segments.
Compared to the Q4 of 2019, the Upstream Clean operating results decreased significantly to €184,000,000 The main driver were negative market effects of €354,000,000 A direct reflection of substantially lower oil and gas prices. OMV's realized oil price decreased by 32% in line with Brent. The realized gas price declined by 18%, while the Austrian hub prices were slightly higher than the Q4 part of 2019. This was due to a decline of gas prices in Romania And in Malaysia and the 2 month time lag effect for half of our Russian gas volumes. Production decreased by 33,000 to 472,000 barrels per day due to a lower contribution from Libya, Natural decline in Romania and weaker demand in New Zealand.
In Russia, production was slightly lower than in the Q4 of 2019 due to the works at a booster compressor that will enable increased production starting with the Q3 of this year. In Malaysia, the production more than doubled to 36,000 barrels per day as a result of the start up of the SK408 gas fields. Total sales volumes declined by 23,000 barrels per day and are thus roughly in line with the decrease of production. Depreciation was €83,000,000 lower than in the Q4 of 2019 due to the reduced production and a lower asset base because of impairments Taken in the Q3. The Clean CCS operating result in downstream decreased slightly year on year to €369,000,000 The impact of the weaker refining margins and lower demand was almost offset by a positive contribution from margin hedges, a strong performance in retail as well as better performance of Borealis and the full consolidation of its results for the last 2 months of 2020.
Total refined product sales were 16% below the Q4 of 2019, mainly driven by the significant drop in jet fuel volumes. Sales volumes in retail were 10% lower than the respective quarter of 2019 due to strict lockdowns across Europe. This effect was compensated by strong unit margins, a higher share of premium fuel sales and cost reductions. And the petrochemicals business result increased by €9,000,000 to €43,000,000 The contribution from Borealis to downstream results rose Extentially from €50,000,000 to €162,000,000 Yes, that's a very well Performance to take Alfred on our OMV Board. Good entry ticket, Alfred.
On the account of two factors, the improvement in the quarterly performance of Borealis and the consolidation of the entire business into our results After the closing of the end of October. Borealis recorded excellent results in the Q4. In Europe, the company benefited from higher polyolefin sales volumes with stronger margins and positive inventory effects. These were partially set by the decreased light feedstock advantage versus naphtha and an unplanned outage of the steam cracker in Finland. In addition, the fertilizer business was down year on year due to the operational issues and decreased margins.
La Roche recorded a Significant improvement, mainly driven by increased polyolefin volumes and prices in Asia. The contribution from Refining and Trading came in at minus €33,000,000 due to still depressed refining margins. Aetna Global Trading went live in December. Our gas business contributed €79,000,000 to our results, which is a slight decrease versus the prior year quarter. The results were impacted by a lower performance of the storage business, which was almost compensated for by significantly higher earnings From the power business in Romania, gas sales volumes rose by 13% on account of increased sales in Germany and the Netherlands, Slightly offset by lower sales in Romania.
As a measure to preserve cash in challenging year 2020, we initiated another substantial cost cutting program in March. Our target was savings of around €200,000,000 in OpEx and exploration expenditures. By the end of 2020, we delivered around €310,000,000 Roughly €180,000,000 is from OpEx savings on a comparable basis to 2019 and around €130,000,000 from the reduction of exploration expenditures. We expect that these savings will be carried through in subsequent years. As shown in the development since 2016, we are continuously focused on driving efficiency Through our cost base and we have a strong track record of delivery.
At €830,000,000 4th quarter cash flow from operating activities excluding net working capital effects was up 21% from the previous quarter and just 14% lower than in the Q4 of 2019. Net working capital effects generated a cash outflow of €151,000,000 Looking at the full year picture, cash flow from operating activities, net working capital effects amounted to €2,800,000,000 down 35% compared to 2019. This is mainly attributable to upstream, which was severely impacted by the decline in oil and gas prices. Since net working capital effects showed a big positive swing in 2020, cash flow from operating activities came in at €3,100,000,000 Despite the very challenging market environment, we were able to deliver an organic free cash flow before dividends of €1,300,000,000 The result shows the quality and resilience of our integrated business portfolio. Our organic free cash flow was more than sufficient To cover the payments of dividends in the amount of €879,000,000 The inorganic cash flow from investing activities was 4 point €1,000,000,000 mainly reflecting the acquisition of the additional shares in Borealis.
Let's now have a quick look At the Borealis cash generation, it is very impressive that even in the year of crisis 2020, Borealis delivered a very strong operating cash flow of €1,600,000,000 a slightly increase versus 2019. This includes the dividends from the participations Borouche and Baystar. Building on the cash flow strength, Borealis is currently investing in growth. In 2020, the company made 2 significant acquisitions, the additional 25% stake of Nova Chemicals in the U. S.-based Base Star Joint Venture, Where now Borealis holds 50% and a controlling stake in the South Korean compounded DYM solution solidifying Borealis position in the global wire and cable market.
In 2020, Borealis also invested into a new propylene plant in Belgium, one of the largest and most efficient PDH plants globally and into the Bay Star complex in Texas. These projects will significantly increase the Borealis' cash generation ability. Net debt, excluding leases, increased Excluding leases defined as net debt to equity rose to 41%. However, this is only a temporary increase As our divestment program will lead to a quick deleveraging, if we consider the divestments already signed Totaling a net debt reduction of more than €1,000,000,000 our gearing ratio excluding leases would be around 35%. Our disposal program continues in 2021 with the 2nd divestment package announced today.
We aim to reach a gearing ratio excluding leases of around 30% by the end of this year. To allow for a better comparability With our industry peers, we have introduced the leverage ratio as a new KPI starting this quarter. This will be calculated as The ratio of net debt including leases to capital employed. As of end of 2020, the leverage ratio stood At 32%. In 2021, we will report both ratios, the gearing ratio excluding leases and the leverage ratio.
At the end of December 2020, OMV had a cash position of €2,900,000,000 and €4,200,000,000 in undrawn committed credit facilities. Ladies and gentlemen, as I already mentioned for the fiscal year 2020, We propose an increase in our dividend per share to €1.85 Since 2015, We have increased our dividend at an average rate of 13% per year. We here with reconfirm our progressive dividend I will now move on to the outlook and start with the capital spending. In 2020, as one of the measures to preserve cash, we cut our organic CapEx to €1,700,000,000 a decrease of around 30% to the original budget for last year. As we delivered on the planned reduction, however, due to the full consolidation and Borealis in the last 2 months of 2020, total recorded organic CapEx was €1,900,000,000 Going forward, we are planning to spend around €2,500,000,000 to €3,000,000,000 for OMV Group, including Borealis.
Realis is currently in a growth phase and its organic CapEx is expected to be higher in the next 2 years compared to the 2019 level. In 2021, we are expecting an organic CapEx of around €2,700,000,000 Which includes non cash items such as leases of around €200,000,000 The CapEx split will reflect Our new priorities, the investment in chemicals, cyclical economy and low carbon solutions will account for around 40% of the entire spending. In upstream, we plan to invest into our development projects, notably in Malaysia and the UEA. In downstream, we will invest in sustainable energy projects such as co processing and re oil and in the expansion of our steam cracker in Brukhausen. At Borealis, the focus will be on the major growth projects in Belgium, the PDH plant, which will come on stream in 2023.
The strict capital discipline reflects our capital priorities, reducing our debt, following the Borealis acquisition and delivering on our progressive I would like to give you a bit more insight into the phasing of our synergies program We announced following the Borealis acquisition. We expect synergies of at least €800,000,000 from operational cost savings, combined purchasing, debottlenecking, value chain optimization as well as tax benefits until end of 2025. The program is well on track. Already in this year, we expect to realize synergies of €50,000,000 to €80,000,000 Next year, these will increase to around €150,000,000 And for the period from 2023 to 2025, We expect around €200,000,000 yearly through 2025. Let me now give you an update on our divestment program.
We are well on track and confident about delivering the envisaged €2,000,000,000 by end of this year. We were able to sign agreements on all three divestments in the first package by end of last year, resulting in a deleveraging effect of more than €1,000,000,000 Today, we are announcing the 2nd package Which comprises 2 divestments. First, Borealis will start the sale process for the nitrogen business, Which includes the fertilizer, technical nitrogen and the melamine products. Borealis operates fertilizer production plants at the heart of important crop protecting producing regions in Austria and France. With around 60 warehouses across Europe and around 5,000,000 tonnes of products supplied annually, Borealis is one of Europe's leading fertilizer producers.
The company's share in Rossier, which operates the production sites in the Netherlands and Belgium, is not presently being considered within the potential sales process. Borealis is also one of the global market leaders in melamine, the most valuable and sophisticated product in the nitrogen chain. The majority of the Borealis melamine production is destined for the wood based panel Borealis will continue to focus on its core activities of providing innovative solutions in polyolefins and base chemicals. And second, we will start the divestment process for our retail and commercial operations in Slovenia. We are currently the 2nd largest retail player in the country After the national company and we are active in the commercial fuel market as well.
OMV operates 120 filling stations equipped with 4 courts and located on highways in the main demand centers having a throughput above the OMV average. However, the integration of our with our Schweikert refinery in Austria is limited as we partly supply the network through the import storage terminal at Copa on the Adriatic Coast. A third divestment package will follow during the course of this year. We aim to accelerate cash flow generation to deleverage the company, Let us now come to our main assumptions for this year. Before I go into details, I would like to mention that Starting with the Q1, we have changed our structure to 3 reporting segments: Exploration and Production, Refining and Marketing and Chemicals and Materials.
Starting with exploration and production for the full year 2021, we assume an average Brent price in the low 50s And an average realized gas price above €10 per megawatt hour. We expect average production of around 480,000 birds per day in 2021, Depending on the security situation in Libya and imposed production cuts by governments, we currently The contribution from Libya of around 35,000 barrels per day, we have hedged a quarter of our production for the first half of the year at a price of around $55 per barrel. We expect increased production in the U. A. Due to the full ramp up of the Oumlulu oilfield, The plant divestments of our oil fields in Malaysia, Kazakhstan and New Zealand will have a negative impact on our production volumes.
The refining indicator margin is projected to be above the previous year level of $2.4 per barrel. We have again hedged part of our middle distillate volumes and we expect a positive low double digit €1,000,000 contribution in every quarter of 2021. The utilization rate of the European refineries is expected to be at the prior year level. There are no major turnarounds planned for this year. Total product sales volumes are projected to be higher than in 2020.
Retail margins estimated fall below the very strong 2020 level impacted by the upward trend in brand price. Commercial margins are expected to be higher due to an assumed rebound in the aviation industry. Let me now come to Chemicals and Materials. Starting with the Q1, instead of the petrochemical margin, which we reported before, we will now publish the In addition, we will disclose the polyethylene and polypropylene indicator margins and volumes. The European ethylene margin and the propylene margin are projected to be at prior year level.
The European polyethylene and polypropylene indicator margins are estimated to be above the prior year level. The polyethylene sales volumes are projected to be slightly above the prior year level, while the polypropylene sales volumes are expected to be in line with 2020. We expect the claim tax rate for the year 2021 to be in the mid to high 30s. Ladies and gentlemen, since March 2018, when we announced our strategy, we have substantially transformed our And reach significant milestones. Upstream has developed into a high quality low cost asset base focused on gas.
Production reserves increased and are more regionally balanced. In downstream, we expanded our refining Internationally and most significantly for the future direction of the company, we have extended our value chain into high value chemicals. Following these significant developments in our portfolio, today, I would like to give you a brief update on our main strategic directions to 2020 5. As I mentioned in the beginning, we are currently working on our strategy update and we will provide you with a comprehensive picture at our upcoming Capital Markets Day. As I mentioned, going forward, we have changed our board structure, Having established Chemicals and Materials as new business segments to better reflect our future strategic priorities.
At group level, we are focusing on chemicals growth, leveraging the integrated value chain and maximizing value through our traditional oil and gas portfolio. We are aware that reducing emission is the license to operate in a low carbon future. Therefore, We are focusing on expanding our portfolio of low and 0 carbon products, natural gas, chemical products and alternative fuels. Something that will not change in the financial framework we presented to you in 2019. We reconfirm our aim to achieve a clean CCS operating result and an operating cash flow excluding net working capital effects of at least €5,000,000,000 by 2025 each.
The group strives for ROCE of at least 12 While the financial framework remains unchanged, We are revising some of our business targets due to the significant developments in our portfolio and the fast changing landscape of our industry. In exploration and production, the business will be run for value and we will harvest cash flow to enable transformation at group level. We are revising the previously announced 2025 targets of 600,000 barrels per day in production volume and 1P reserves of 2,000,000,000 barrels. We are no longer pursuing growth in production. Based on the current portfolio, including our organic projects pipeline, We expect to maintain a relatively stable production corridor of around 450,000 to 500,000 barrels per day with around 60% gas by 2025.
Our unit production cost will remain below $7 The exploration and appraisal activities will concentrate on gas and low cost opportunities With a total budget of around €200,000,000 per year, exploration production will focus on the target of a 6 percent reduction in carbon intensity of our operations. This effort will include portfolio changes, Phase out of routine gas flaring and venting, methane emissions reduction and projects like the photovoltaic plant in Austria for electrification of our own operations. OMV will leverage Borealis as a platform for growth, focusing on delivering the organic projects As well as building a material circular economy portfolio, we will invest in chemical and mechanical recycling We no longer aim to further increase our refining capacity, But we plan to shift the output of our refineries towards petrochemicals to reflect expected demand changes. In addition, we are exploring projects in the area of conventional and advanced biofuels, synthetic fuels, Hydrogen and Energy Efficiency. We have earmarked investments of €1,000,000,000 by end of 2025 In Recycling and Innovative Solutions for Energy Transition.
For our
gas business, We reconfirm the strategy we presented in 2018. We believe that gas We'll play an important role in the energy transition towards low to 0 carbon future in the markets we operate in. We have made significant progress since then. We expanded our market presence to Northwest Europe and increased sales by almost 50%. In Germany, the biggest gas market in Continental Europe, We reached a 7% market share by the end of 2020.
Going forward, we will strive to increase sales volumes by an additional 50% with a target of a 10% market share in Germany. We want to become the leading integrated gas supplier from Northwest to Southeast Europe. Thank you for your attention. Now over to Alfred. After his presentation, my colleagues and I are more than happy to take your questions.
Alfred, it's your turn. Thank you, Rainer. Ladies and gentlemen, good morning and a warm welcome from my side as well. It is my pleasure to give you further insight into Borealis today. I would like to start with a recap of who we are.
Royalis is one of the world's leading leaders of advanced and circular polyolefin solutions and the European market leader in base chemicals, fertilizers and plastics recycling. We have a long history and expertise in the polyolefin business. Our company was established 25 years ago by 3 oil companies Neste, OMV and Stadt Oil. Today, we have a global footprint in an approximately 250,000,000 tonne global polyolefin market that is expected to grow Above the GDP rate. Our base in Europe is strong and we have access to international markets through our joint ventures, Porrouges and Baystar.
We are strong innovators and differentiate ourselves from the competition, thanks to our unique proprietary PoaStar technology, which we only license to venture partners. Our innovation capabilities make us a leading force in the circular economy And our poor cycle technology ensures our leadership in the field of recycling. Our production assets benefit from access to advantaged feedstock, high feedstock flexibility and olefin integration. This setup makes us resilient to market price swings And is a hedge against oil price volatility. We have a significant share of specialty products in our portfolio with a wide end use industry reach strong growth potential.
A significant part of our polyolefin solutions are used for products with long end use life. Our innovation and technology capabilities providing solutions for our customers have ensured excellent relationships with them over the years along with a strong Borealis brand name. Life demands progress, we are reinventing for more sustainable living is the guiding principle portfolio split between polyethylene and polypropylene. With a total polyolefin production capacity of 5,800,000 tons, We rank number 8 globally. In Europe, our production capacity of 3,800,000 tons puts us 2nd in the market.
Borealis is a highly profitable business and has consistently delivered strong financials over the years. In a very challenging 2020, which featured a global pandemic and economic slowdown, volatile oil prices In significant polyolefin capacity additions, our operating result calculated as our EBIT plus the net income contributions from our equity participations came in only 26% lower than the previous year. This showcases the resilience of our business model, Our innovative product portfolio, our cost discipline as well as our balanced geographical footprint and feedstock profile. From the joint ventures in the Middle East and the United States was only slightly lower. However, our European operations in base Chemicals We're significantly impacted as a result of negative inventory effects and decreased light feedstock advance versus naphtha in our steam crackers in Europe.
In addition, the fertilizers contribution was down from the strong 2019 figure. Despite these effects, we were able to deliver an operating cash flow above the previous year's level. If we look at the uses of cash, we differentiate between our running business and our growth and transformation efforts. The underlying CapEx requirement for our business was between €300,000,000 €500,000,000 per year In the period 2015 to 2019, in general, we are a high free cash flow company. As Rainer mentioned, we are currently in a growth phase and our CapEx spending will be above average until 20 23.
In response to the difficult situation in 2020, we cut CapEx by approximately 30% from the initial level budgeted for 2020 and leveled out our growth projects to 2023. After that, We expect an increase in cash flows from new projects and a decrease in the level of CapEx for growth projects. Let me show you briefly how 2020 developed for Borealis. I would like to start by pointing out to you that generally speaking, the recovery for our business has been remarkable. Throughout the year, we have seen strong consumer driven demand for our products.
The second quarter was the most difficult With reduced demand in the durable sectors and low prices. In the second half of the year, we have seen a strong recovery, resulting in a strong Q4. You can see our quarterly sales performance, excluding our share from the joint ventures, split into our main three product categories, polyolefins, base chemicals and fertilizers. While our business makes up less than 50% of our sales volume. It accounts for around 70% of our sales revenue.
In the Fertilizers business, we sold around 1,000,000 tons per quarter, slightly lower than in 2019. However, The results declined significantly in the second half of the year versus the strong year 2019 due to weaker industry margins and operational issues. The price of natural gas, the key feedstock for production further increased in the 4th quarter, putting additional pressure on margins as price adjustments are usually lagging behind feedstock cost increases. Base Chemicals sales volumes were lower in 2020 than in 2019, With a very strong Q1 posting sales around 500,000 tons, followed by a decrease due to our cracker outages in Sweden and in Finland. Both crackers are now operating again and we expect volumes to pick up in the Q1.
The base chemicals contribution Was also adversely affected by decreased light feedstock advantage versus naphtha, especially in the second and third quarters. Despite a very challenging 2020, the polyolefin sales volumes in Europe increased by over 2% year on year. We sold around 970,000 tons of polyolefins quarterly. In the Q2, the automotive and construction sectors Recorded a significant decline due to the lockdowns across Europe. However, we managed to compensate parts of the lower demand in these sectors with higher sales in healthcare and packaging.
This shows the significant breadth of applications for our products and the versatility of our portfolio, the sales volumes of both Borouge and Beispa increased by around 10% year on year. On the whole, integrated polyolefin industry margins increased in 2020 versus the previous year, driven by a strong polyolefin market in both Europe and Asia. Coriolis benefits from a large share of specialty grades in its portfolio, Which ensured robust financial performance in the polyolefin segment in 2020. These specialty grades account for approximately 60% of the margin and 40% of polyolefin sales volumes. Specialty grades are products with superior differentiated properties and added value for the customer created through innovation and technology.
These products command a higher margin than the standard industry margin and are less exposed to market volatility. Energy, Automotive and Advanced Products are the main sectors for which Borealis produces specialty grades. Polyolefin sales for the energy industry, where Borealis is a global leader, remains stable throughout the year. Borealis polyolefin business core of our operations and we strive every day to develop innovative solutions for our customers. With around 10,000 patent applications successfully filed and patents granted, we believe we are one of the most innovative Our guiding principle is to reinvent for more sustainable living.
Let me take you briefly through the five Starting from the left with the automotive industry. Corallis focuses on light weighting of In the interior, exterior and under the bonnet applications. In pipe and fittings, Borealis supplies infrastructure, hot water in oil and gas pipes. In Consumer Products, for dialysis, main markets blown film, thin wall packaging and caps and closures. Advanced Products mainly features our healthcare applications, appliances and polyolefin solutions with a strong position in these markets.
Borealis is one of the largest product offerings in the Healthcare business. Last but not least, we have the Energy Cluster, which produces solutions for wires and cables, Consumer Products is the largest segment accounting for approximately half of our polyolefin sales volumes. The other sectors each account for 10% to 15% of total sales volumes. Our polyolefin solutions have a long use life. For example, our pressure pipes for gas and water utilities have a life of around 50 years, Power Cables 40 years and Automotive Components around 15 to 20 years.
I would like Briefly highlight our energy sector. Ladies and gentlemen, Borealis is number 1 in the world in this market. This is a true specialty business given the complexity of the required products and can be served by only a few players globally. The very high material requirements of this industry. Our production process meets the exceptional cleanliness requirements which are necessary to avoid transmission interruptions, for example.
Our BoerLink technology makes power grids more robust and reliable, Thereby reducing transmission losses. With our technology, it is possible to transport energy from renewable sources more efficiently and over longer distances to the end consumer. Crosslink polyethylene power cables made with our Boerlynx technology will be used for the majority of the corridor projects in Germany. Comprising 3 separate corridors, this huge project is the major enabler of the German Energy Vendor for Energy Transition. We further strengthened Our global position with the acquisition of a controlling stake in South Korean compounder, PyM solution last year.
This move ensures a global supply and enlarges our asset footprint and global product offering. Its outlook is attractive with a growth rate of 3.4% above global GDP until 2,030. Polyolefins are increasingly being used as a substitute for other energy intensive materials and they remain essential These sectors underpin the robust overall rise in demand, which stems primarily from Asia. Demand in mature markets such as Europe and North America is expected to remain generally healthy, in line with economic development. If we look into the developments of polyethylene and polypropylene separately, we expect superior growth for polypropylene due to rising demand for lightweight materials for automotive components, construction equipment and consumer electronic The strong growth trajectory over the last 10 years on this chart Illustrates the successful development of the group.
Borealis, Borouge and Baystar have a truly global reach With a record sales volume of 8,600,000 tons globally, including 100% of each company sales. The sales figure more than doubled over the last decade, primarily due to the expansion of Parroux, which is a true success The joint venture has successfully combined the leading edge Vorstar technology with competitive feedstock and access to the Asian growth markets. Our main sales markets are Asia, accounting for more than a third of sales in Europe. Currently, Behistar accounts for only a small percentage of sales. However, With our focus on geographic expansion, the share of sales attributable to North America will grow significantly After the start up of the expansion project.
Another key success factor for Borealis is the operational production setup. In Central Europe, Borealis benefits from the integration with OMV's refineries in Austria and Germany, Olefins are supplied over the fence. Coriolis operates 2 crackers in Stenungsung and in Poivor. Both have high feedstock flexibility and can use naphtha, butane, ethane and propane. Our crackers can use up to 70% light feedstock and up to 50% naphtha.
The cracker intake can be adjusted to the actual market conditions. In Belgium, Borealis runs a propane dehydrogenation unit based on 100% propane feedstock. In addition, Borealis operates caverns and logistics infrastructure in Sweden, Finland and Belgium, Allowing for optimization of the feedstock slate and leveraging market price volatility. Corallis is thus able to capture significant feedstock advantage. In the Middle East via Porrouge as well as in North America via Baystar, Borealis benefits from attractive feedstock cost based on ethane.
The advantage of the setup brings us into a 1st quartile net cash margin position in our industry. As mentioned earlier, Borealis is actively pursuing a growth and geographic expansion journey. Europe is Borealis' core and base. Here we are advancing the largest single brownfield investment in Coriolis' history, our new world scale propane dehydrogenation unit in Karlor Pension. Given the growth in demand for polypropylene and decline in production via the classic cracker route And being based to a higher percentage on ethane on purpose propylene production has increased in relevance.
With its location in the Antwerp Rotterdam Amsterdam area, one of the largest chemical clusters in the world, we are exceptionally well positioned to sell of 2023. In North America, the expansion of our Baystar joint venture with Total is progressing well. The 1,000,000 ton cracker is already in the commissioning phase and we expect start up in April. The construction of the new world scale Boerstar polyethylene plant is well underway. The polyethylene capacity of this site will increase by 625,000 tons to more than 1,000,000 tons.
Start up is expected approximately a year from now. This plant will be the first to use our Boerstar technology in North America, enabling us to supply our customers globally with specialty grades. At the same time, it will benefit from advantaged ethane feedstock. Building on our very successful partnership with Barouche, We are currently building a 5th Borstal polypropylene plant, which will increase our capacity by 500,000 tons to 5,000,000, A more than 10% capacity increase. The expected start up is in the Q3 of this year.
We are also analyzing other growth opportunities such as Boruch 4. This project is currently in the FEED stage. Ladies and gentlemen, in addition to the significant growth opportunities, We also see changing patterns in our industry. Demand for recycled plastics is increasing due to increasing awareness of the importance Borealis is a leader in this emerging industry. We were among the 1st plastic manufacturers to work toward a circular economy several years ago.
Ever since then, we have been consistent in our efforts and have focused on recycling and design for circularity. We currently run for 4 mechanical recycling plants in Austria and Germany with a capacity of around 100,000 stones. Recently, we announced a collaboration on a demo plant for advanced recycling In Germany together with Tomra, a Norwegian collection and sorting machine manufacturer and Zimmermann, a German waste management company. The plant is one of the world's most advanced mechanical recycling plants and represents a first towards developing highly demanding applications for various industries such as automotive and consumer products. Accounting for more than a quarter of global demand, large consumer product companies are taking steps to accelerate the use of recycled and renewable materials in their products.
Just to give you an example, Unilever, a major global consumer products company, Recently announced that it aims for all of its plastic packaging to be reusable, recyclable Work compostable by 2025 and it intends to use at least 25% recycled plastic in its packaging by the same year. Additionally, European legislation sets a 50% recycling target by 2025 for all member states. Using our proprietary poor cycle recycling technology, we are able to transform waste into recycled polyolefins. What is very important is that we can offer a consistent supply of versatile, high quality recyclate To producers and plant owners in various industries, we project that the recycling market will expand beyond the average polyolefin growth rate, Driven by a change in people's willingness to pay for more sustainable products and government initiatives geared reducing greenhouse gas emissions in this emerging market. We aim to make recycled polyolefins a significant part of our portfolio activities using its ReOil technology complement our efforts in this area.
The ReOil technology Chemically recycles plastic waste into raw materials, which then can be used by Coriolis to produce polyolefins. Thus, we can offer to customers 100% circular and sustainable polyolefins. Nestle has now become the 1st polyolex customer to use these polyolefins in consumer goods packaging. We are very active in circular economy efforts and partnerships play a very important role for us. We must work together to build a circular economy.
3 years ago, We created our Everminds collaboration platform dedicated to promoting a more circular mindset in the industry and collaborating with upstream and downstream value chain partners to accelerate the transition to a circular plastic economy. Just to give you one example, Together with our value chain partners Neste and Henkel, we produced the 1st polypropylene from renewable feedstock derived entirely from waste and residue streams. These premium polyolefin products Have the same material performance as virgin polyolefins, yet with a lower carbon footprint. Is including renewable polypropylene content in the packaging of 1 of its major plants. I know you're all waiting for the question and answer session, so I won't keep you any longer.
But there are 4 quick things that I would like you to take away from this presentation. We are a growth company and with a strong feedstock position. We are very innovative and focused on circular economy. And last but sure not least, we are a company that generates very high free cash flow. Thank you for your attention.
Thank you, Alfred. Let's now come to your question. I'd ask you to limit your questions to only 2 at a time that we can take as many questions as possible. The first question comes from Mehdi Anabati, Bank of America.
Hi. So good afternoon all And thanks for taking my questions. So first, just would like to congratulate you from the strong results and very strong outlook. And I will ask 2 questions, please. So the first one is about your asset disposal program.
So you've announced a second tranche with the potential sale of the Nitro division and some assets in Slovenia. Just regarding the Fertilizer division, the Maestro division, sorry, how confident are you regarding the disposal Of that asset in the current environment, would you say that there is an appetite for that kind of assets In the market currently or not really? Did you already start some discussions with some potential buyers or no? And the second question is about the petchem margin. So my indicators show relatively strong That can margin at the beginning of this year compared to the Q1, for example, or even in the Q1 last year.
So just wanted to know if you see the same thing happening for Borealis
Well, Mimi, on the asset disposal program, let us first check the market before I give you a smell what is possible this year. I think it's a little bit too early. Definitely, I can remember last year when we made the announcement of our asset disposal program, You were all telling me, Reiner is so difficult, the market and because of COVID-nineteen and we could manage. And I am more than convinced that Alfred and his team will manage To sell this asset in the market, you're absolutely right. It's not easygoing, but all the other assets we have sold last year, we're also not easygoing.
So I am confident we will not disappoint you all and we will deliver on the package we have announced. Well, on the petchem margins, what I see today is that petchem margins At the moment, starting into 2021, we're a little bit under pressure because of rising naphtha prices. So the feedstock was going the feedstock prices went up. And now We see that we can adjust our chemical product prices accordingly. Yes.
So it's on the way. But I wouldn't be now over optimistic that the first quarter is now the best we see in 2021. It's also depending how the Naphtha and oil prices are going further up.
So Perfect. Thank you very much, Lena.
Rafael, are you We come to Michele Della Vigna, Goldman Sachs. Congratulations
on a very Strong set of results in quite a difficult environment. Two questions, if I may. The first one is really about the outlook for the Polyolefin Margins. It seems like there's quite a few new projects starting up in the next 24 months. I was wondering if You think there is any risk that from the supply side, you get some pressure on the margins over the next 2 years from what has been Quite a good environment in the last 3 months.
And then secondly, on the recycling side, I was wondering if you could perhaps Help us understand a bit more the economics of mechanical recycling versus chemical recycling and pyrolysis and where you think
Okay. Yes, Alfred, I'll start with polyolefin margins. Thank you for your question, Michele. I think you're correct. Last year in 2020, we did some see some additional capacity coming on stream and it is also expected that in 2021 globally Additional polyolefin capacity will come on the market.
However, what we do see is that many of those projects delayed because of the pandemic. So there's a couple of months delay. And the second piece That we have actually seen is that in 2020, the polyolefin demand was much stronger than anticipated with significant growth rate. So and that resulted in a very strong 4th quarter. Currently, we see still very good demand for both polyethylene and polypropylene.
However, The further situation will depend on number 1, as Rainer said, the feedstock evolvement And secondly, in my view, the development of the global pandemic and how that may impact the global demand.
Yes, Michele. Thomas is speaking. I will take the question about the recycling. You're absolutely right. It's not an easy one with Economics, if you have just one type of recycling.
But this is the beauty of what we are doing together now with Borealis. We have, On one hand, the mechanical recycling expertise and then we have the chemical recycling. Because if you do just mechanical recycling, You have the problem that you have a lot of material that's not recyclable and you can use that in the chemical part. And with that, we think more in the direction of recycling hubs where we combine these two technologies. And I think there are not many companies who can say that they have the technology to do those two things together, plus Having the knowledge about the product, having the knowledge about processing the synthetic crude and all of that is now in our portfolio.
And therefore, we believe that this is definitely something where we can make money with it.
Thank you so much.
The next questions come from Thomas Adolff, Credit Suisse.
Good morning. Good afternoon. Two questions for me, please, as well. Just firstly on the upstream. Your target previously to go to 600 kilobytes D, you've now ditched to 450 kilobytes D to 500 kilobytes D.
Let's take the midpoint, 125 kilobytes D difference to your prior target. Where is this production or which projects are you foregoing or are you just phasing them and extending the plateau of the overall group. And then secondly, just on The CapEx range of 2.5% to 3%. I think you mentioned Borealis will peak by in the next few years And after 2023 will fade, where is that are you going to stay in that range beyond 2023? And If Borealis' spending is declining, which areas are you ramping up spending?
Thank you.
Thomas, Hans speaking. I will take the first question regarding production. Currently, what we're forecasting for 2021, as Rainer said, is the 480,000 BOE per day, Not considering any, jardins due to security constraints like in Luebbe as we had last year. So that's the potential that we have right now. We have a Very good and very economic pipeline of projects like Neptune, Sharon, Visting, Hales Iris, Sab, Roulo, just to mention some of them, which are good enough from my point of view and which have the potential To keep the production level until 2025 where we are right now.
Thomas, this is Reiner. I tried to answer your question, yes. Well, first of all, The majority of the CapEx we have now planned until 2025, we will use like Hans said For our high value upstream pipeline to keep the production level we see nowadays. Secondly, when we you're absolutely right, Borealis is peaking at a point of time and then Borealis is declining. But I would like to clearly express here that OMV chemicals will be more than Borealis.
So I can leave it to your fantasy what else could be invested for, but there must be a story up Coming until 2025, which means it's more than Borealis.
Thank you. Can I just come back to the production question? Because I do remember early in 2020, we've discussed how production can grow. You've just talked about how you can sustain production, but you didn't actually discuss which projects you're not developing versus prior expectations. Thanks.
Coming back, again, it's me again. What we have been saying and what we have been guiding is that we see Argimo 4 or 5 as an opportunity And not as a fixed investments, which we will take. So what I told you this 450,000 to 500,000 BOE range, Which will be filled by the projects which I told you before is not including Achimov. And what you need to consider as well that we go also for a divestment program. So we have been selling already Achimov.
We're divesting Marie. We are divesting our oil assets in Malaysia. So only these 3, here we will lose Between 15,021,000 BOE on a yearly basis. So this is also compensated by the Project pipeline which we have. Does it answer your question?
Thank
you.
Good.
We now come to Henri Patricot, UBS.
Yes. Hello, everyone. Thank you for the presentations today. I have two questions, please. The first one on Borouge.
I was wondering if you could give us A sense of the CapEx outlook there, if you go ahead with the expansion in particular and what that means for the dividend outlook And then secondly, just on the hedging Decisions that you've made, can you give a sense of the policy behind that and what we can expect In the future, on what basis do you decide to hedge on both on the up tube side, hedging the oil production and also On the refining side, should we expect to see ongoing hedging? Is there anything particular where you decided to hedge this time? Thank you.
This is Reinhard. Let me start with the hedging topic. First of all, we have clearly hedging as an instrument both for operations as well as for defensive financial measures. For operations specifically in the downstream side, we see it as a common tool to make sure that we do not have any kind of open positions And make sure that we can have a stable situation of our turnover versus market volatility. On the upstream side, when it comes to commodity hedging, we look very carefully on what are the specific goals that we are pursuing with the company.
2021 is certainly a company we're deleveraging and the focus on cash flow delivery is first priority. So if we have situations in the market where we see a clear upside versus our Initial plannings and initial assumptions that we had, there will be certain portions that we keep As a means to hedge, this is exactly happening with the volume that we have hedged now for the first half year, Well, we have seen very good pricing level on the oil side and therefore we decided A certain portion and it's a modest portion to be honest, to be also hedged in order to make sure that the cash flows For this year and deleveraging targets are in line. So I hope this clarifies.
Thank you.
Hi, this is Alfred again. On your Barouch question and CapEx, there are 2 different projects in Barouch. 1 is The 5th Puesta polypropylene plant, the PP5 project, in this project, we are almost Coming to the end, we are close to 90% complete and anticipating start up in the Q3 of For 2021, it's about a 10% capacity increase for the total Poruj complex. On the Bigger project, Baruch 4, the 4th stage there. We are currently in what is called the front end engineering and design phase And trying to understand and optimize the complex what it should look like.
So it's too early to make any comments on the CapEx.
Okay. Thank you.
Thanks, Hori. Next is Peter Lowe, Redburn.
Hi. Thanks for the Strategic update. First is another one on CapEx. Given the shift towards running the upstream business for cash, Can you give an indication of how much of that €2,500,000,000 to €3,000,000,000 of annual CapEx will go into Upstream? And then I guess as a follow-up Rather than integrated oil company and over what time frame do you think that transformation could occur?
Thanks. Peter,
this is Ryan. Peter, I can give you an idea about the share of upstream in our CapEx budget for 2021. It's It's about €1,000,000,000 to €1,100,000,000 The years after, let's wait and see How the projects are going to be executed? So therefore, take this as an indication for 2021. The timeframe to transform the company, well, I think as early as possible, Yes.
I know that you are disappointed to hear that, but it tells you that I would like to ask you to wait Until our Capital Markets Day, because this is the main topic we will discuss with all of you. It will headline Our sustainability strategy and the transformation into chemicals. And because I like all you guys so much, I would like to see on our Capital Markets Day. That's the reason why I keep it as a secret.
Thank you. I look forward to it.
Next is Josh Stone, Barclays.
Hi, good afternoon. Thanks for the presentation and welcome to Alfred to the presentation as well. Two questions, please. Firstly, on the gas markets, Prices have been very high during the start of this year. I was wondering if you could comment on to what extent Rovi's upstream portfolio has managed to capture some of that.
I've seen some of your Malaysian assets being linked to LNG in Asia and to what extent that could be a feature in the Q1. And then secondly, on the waste plastics recycling or chemical recycling, are you able to provide an update on the re oil project Just see where are we now? How close are we to being able to scale up that business or that project? And I guess it's just linked to that more broadly. Do you think for this industry to grow, does it need further help from the government or not?
Thank you.
Hi, Josh. This is Thomas. Short update on real oil. So we have a pilot plant at Schwechat refinery where we can process 100 kilograms per hour. So this is, of course, not a big unit that we want to build, but this is a very important one to really understand all the operational topics.
We had really very good progress over the last month. We processed several 100 tonnes of Material there with the different qualities because it's really about making sure that we fully understand where is the optimal point to process in terms of which parameters do we use for the different feedstocks. So this is something where we have really clarified what is required for the next stage. And therefore, we are already In the phase where we design the new unit, and there will be news this year on the next So we are looking forward to give you more on that later on, but good progress, operational topics really Developed very nicely and the unit is continuously running, so we are In a good stage.
Josh, I'm going to talk about European gas now. Well, we only can catch the lovely Price increase in the European gas market only partially. I would love to have more, but just remember, it's roughly 40% of the gas we produce in Europe, Which is following the pricing in the European spot markets. And just remember that we have these 2 months time lag, especially with the Russian volumes, And these are very substantially. So it's 50,000 barrels per day production, which is with a time lag coming.
So some of these price increases we have seen especially in now in the Q1 We'll move into the Q2 in our pricing. So this is just Comment on Europe and Hans will give you an idea about the pricing in Malaysia.
Hi, Josh. Thanks for the question regarding LNG also in Malaysia. We had a detailed discussion about the LNG prices in Malaysia when we FID Our Cherun project just recently in OMV, so what we have seen this or the last year, We have seen $5,000,000, $6 per 1,000,000 petu gas prices in Malaysia. We forecasted for the project that those prices will ramp up to $8 per 1,000,000 BTU in 2, 3 years. What we see right now in the market is Much higher demand than forecasted just some months ago.
We see already right now that the price is peaking beyond $8 per 1,000,000 Btu. As I said, as we have been forecasting just some months ago, that this will happen only in 2, 3 years So what we see right now, there's
a demand
is increasing Due to the ramp up in China, but also in India, just give you one figure regarding India. India has just announced some, I think, 3, 4 weeks ago They are covering the primary energy demand by around 6% by LNG and gas, and they are aiming to increase This coverage rate up to 30% until 2,030. This is already giving you a feeling how the Demand for gas and LNG in this region will increase in the upcoming years.
Good. We now come to Sachi Chitokoro, Morgan Stanley.
Thanks for taking my question. I had one regarding the financial framework, please. You Kind of provided our scenario wherein the cash flow from operating activities can go it can increase to more than €5,000,000,000 by 2025. CapEx numbers are between €2,500,000,000 to €3,000,000,000 So there seems to be a lot of room for the free cash flow That could either go into the dividend or can reduce the gearing levels. Your target for gearing ratio is less than 30%, Which you could probably get to in 2022.
I was just wondering how would this additional Free cash flow, how what is the pecking order if it were between shareholder returns and gearing levels? Is there any hard targets for The gearing levels to come down even further and at what level and what are you thinking regarding the growth in the dividend levels?
Yes, happy to take this question. Actually, you're right. Our ambition is very strong and I think the operational platforms Already in place that with the economy recovering, a level of €5,000,000,000 cash flow is in reach. Now of course, if you take the CapEx, we have given you indications on the organic CapEx. And organic CapEx certainly is something that If there is a headroom, can be also accompanied by some inorganic CapEx.
Now for the next years, we clearly have a prime target to deleverage. We have on the other hand shown That we are able and willing to take shareholders' interests very serious. We have announced a dividend increase even in this year. So there is not a link that is direct to say, if we deleverage, we cannot give dividends or raise dividends. We are demonstrating that the financial basis is strong enough to do both.
And you're right, our Envision by the end of 2021 or in 2022 to have the 30% gearing or below will then start to give us a headroom. Solid dividend paid out to our shareholders and ability to strategically grow will all be served By the delta between the 3 and possibly 5.
Shashi, I know Reinhard now since 5 years, And he always wants to keep the cash in his pocket. So the priorities are quite clear, yeah? We would like to deleverage. We would like to bring gearing down. And then the second priority is Our progressive dividend policy, yes.
So I leave it with your fantasy what Reinhard will do with all the cash, But the priorities of capital allocations are set.
That's quite helpful. Thank you very much.
We now come to Bertrand Audet, Kepler Cheuvreux.
Yes, Everyone, thanks for taking my question. 2, if I may, 2 related on Borealis. Is there any inorganic CapEx in Borealis this year? I'm thinking about The funding of the JV Bestar and if there is, can you quantify it? And then the second question, very strong performance in Q4 by Borealis.
And overall, obviously, operating profit was down in 2020. But given what you see, Should we expect Borealis operating profit in 20 Come back at least to the level of 2019. Is that would that be a fair, I would say a view at this stage in 2021. Thank you.
Regarding inorganic CapEx on Borealis, There is the project of Baystar in U. S, where you will still find a couple of Investments respectively, capital injections, and this will be in the magnitude of Some EUR 200,000,000, EUR 300,000,000 in the next year. Other than that, there is no inorganic CapEx, but of course, the organic CapEx that Alfred described around the project in Kallo
Well, Bertrand, as we speak about Borealis, I of course do have a big hope that they are coming back to 2019 level of course, But nobody, especially in the current situation is giving you a little bit of idea how this in 2021 will Deliver, develop, sorry, develop because I think the uncertainties, Especially as we are talking about at the beginning of the year in February, I would say, ask this question again on the Capital Markets Day. I'm inviting all of you, making it worth to come and listen to us, then we might have a better idea because I'm that second half might kick in with a better framework and then we might can give you A better answer and a positive more positive outlook.
Thank you, Bertrand.
Can I
just squeeze the last one is on dividend of Borealis to Mubadala minorities? Can you provide us a feel on what would be the Borealis dividend policy going forward?
We are not disclosing dividend policies As Borealis is just between Mubadala and OMB. But for the coming year, for 2021, We're expecting that in general not to differ too much from the year 2020.
Thanks, Bertrand. We now come to Thomas Pletze, AssetBank.
Yes, good afternoon. Thank you very much for taking my questions. Two questions from my side. First on ADNOC refining, what was the reason of this negative operating performance of this Refining asset, was it any operational issues or simply the market was too bad for Arnott? That would be my first question.
And my second question would be regarding your divestment of fertilizers. What is the reason You chose the fertilizer line to divest. Was it the inferior return or the integration issues similar
Thomas, this is Thomas. I'll answer your question about ADNOC Refining. So 2020 was definitely a very difficult year For ADNOC Refining, we had a big turnaround in the first half, which is, of course, coming along not only with costs, but also with low utilization rate and then the crisis, the COVID crisis really came in and we saw that especially with Product portfolio with Chet being an important part of it, but also NAFTA, It was a very difficult year and therefore, it was also in terms of Yes, not only having the technical issues, also having the market issues, it was difficult. The good news here is that we have solved the technical issues that we had last year. For example, the RFCC, which is a key unit, is running now very smoothly above the planned utilization, original planned utilization.
So this is now solved, but still this year will be a difficult one. If you look into refining margins in general, you can see that we need to get a better situation and this will only come along with More demand on the Middle East Delayed side. We see all over the place that the low demand of jet, for example, is Delivering an oversupply on the Middle East and late side and therefore the margins are challenged. But as I said, the good news is the technical issues are gone solved.
Okay, that's clear then. Thank you.
Hello, Thomas. Thank you for your question. This is Alfred. I will answer your question around the nitrogen business. At Borealis, we have Previously and quite consistently actually stated that Europe is an interesting and important fertilizer market And at the right time, we would in the right conditions, we would be open to divesting the nitrogen business.
Now over the last 2 years, we have successfully completed the turnaround program in the fertilizer business To make it financially more robust, and this has given significantly improved cash flows of the business, And we believe now is actually the right time to take further steps. At Borealis, we will continue to focus On the core activities, which is basically polyolefins based chemicals and circular economy and that also fits well With OMV when it comes to the group strategy development.
Thank you very much.
It's Henry Taube, Berenberg.
Hi there, guys. Thanks for taking my question. Two questions really. One is, I think you talked about upstream CapEx being around sort of €1,000,000,000 to €1,100,000,000 Over the next couple of years. And you pointed to exploration spend coming lower, which it did for 2020.
Should we expect exploration spend sort of flattish through 2021? And then how are you thinking about exploration in the longer term? And then, I guess, my second question is just around It's more of a strategic question, but it's around the recycling activities. And to what extent do you think over time Recycles polyolefins and the recycled demand for recycled polyolefins could cannibalize potentially virgin Probably off in demand. Thank you.
Hi, Henry. I will take The question regarding exploration CapEx. So we have been spending in 2021 Close to €230,000,000 we will we are aiming for the same amount of money for 2021. In the upcoming years, we will focus our exploration activities on Southeast Asia, Norway And deep layers in Romania and Austria, where we have done already seismic activities. So we'll see how many wells we can drill there.
The main focus is Southeast Asia because here we see also the very fast growing market. And in Norway, that's a Perfect play for exploration because you get 78%, no matter whether you are successful with your exploration, Whether you found hydrocarbons, yes or no, you get 78% back from the government. So this is due to the strategic A few on it. So we will keep the exploration will go slightly down, so around EUR 200,000,000 that's what you can expect For exploration spendings in the upcoming years.
Yes. Hello, Henry. Thank you for your question. This is Alfred. I'll answer your question The recycling, maybe to start with, I would like to say that we anticipate continued strong growth for the polyolefin demand area That this will grow with 3% to 5% 3% to 4% going forward, growing above GDP rates.
So That's the overall demand. The question that we are treating here is where will the feedstock come from. And we anticipate the year that increasing Rates will come. I maybe give you 2 data points here. There's a McKinsey study here That was extrapolating that by 2,050, up to 60% of the polyolefin demand could be supplied by recycling.
And then there's a European regulation, the plastic packaging waste directive That is requiring that by 2025, half of the plastic packaging should be recycled. And this is what one should look at. This is why OMV and polyolis, we think this is a significant growth area. We don't see that it will cannibalize the polyolefin demand, but it will change the feedstock supply To the polyolefin production and that's what we see as our strategic opportunity here with 3 oil or with 4 cycle technology.
The next questions come from Matt Lofting, JPMorgan.
Thanks, Florian. Congratulations all on strong full years and thanks for the comprehensive update. On Borealis and Chemicals appreciated Alfred's sharing his insights so soon after deal completion. The summary on the product markets and recycling expertise was really useful. And I also thought the comments on Vorstar Technology was very interesting.
I wonder if you could Band on that a little in terms of what it is about the BorrStar process that differentiates and enables you to meet the elevated Standards that were referenced. And then secondly, turning to demand, demand recovery across the energy complex, clearly Playing out, but likely sort of bumpy through the 1st part of the year. With that in mind, I wonder if you could just talk about the sort of the trends Early 2021 that OMV is seeing on demand through its key downstream markets. That would be appreciated. Thank you.
Well, Matt, I think it will be a good gas year. Yes. So the winter helps. So St. Peter really supported our business in 2021 so far.
If you look down the road, the price curve, it tells you that the gas prices you see now in the FERVY curve is nearly twice, 3 times as high as we have seen it last year. As we see real high off Take from gas storages already in January. In some countries, we are already below the 50%. I think this is supporting the price curve, especially in the traditionally Historically weak to summer quarters. So it could be a good by far a better gas pricing here awaiting us.
What we can see in the downstream market, I think, first half and we really have to cut 21 into 2 halves. The first half, I think, especially the transportation sector, Especially in the Q1, we are now something between $2 $2.5 We might move into a 3 to 3.5 in the summer quarters because driving season will start, but it's going to be a difficult refining year 2021, yes. So I would be surprised. Canaccord stable, yes. They even persist corona.
So that's why I would say 2020, 21 could become a good chemicals here. The same listening to Alfred, it's music in my ear. This was a very nice welcome gift when I looked into the Q4 numbers and that's a good appetite to continue in 2021 of course. When we look into the oil markets, I would say, I can see that there is a potential, of Of course, depending on how the global economy recovery We'll really look like in 2021, but I think there is at least a potential that the oil market can be tight second half of this So what I can smell is of course the potential that we move into the 60s in the second half if We really see economy coming back like many are forecasting. So tells you that Jet is making our business difficult also in first half, but 2nd half comes in with lots of hope.
What else markets? I think that's it. Yeah. Maybe Helena talked a little bit of retail. Yeah, where he did.
Okay, that's it.
Yes, this is Alfred. Thank you very much for your question about Borstar. Really nice question because we are Really proud of Forrester and not just that we are proud, I think it's also a key differentiator for the company. Let me maybe start with saying that we did over the last 25 years, but continue also to invest significantly into innovation and technology in Borealis and the flagship technology there is the technology. With this technology, you can produce both polyethylene and polypropylene.
And We use this technology only for our self or for venture partners. So in our joint ventures, meaning we don't freely license it to the market because we believe that the differentiation we can achieve with it Allows us to be more competitive. So what is that what happens to the products that we make with our Buesta Technology, the products that we make are actually lighter, tougher, stronger and they can be faster processed Then with other technologies and that means that the customers that use our Poerstar product, they can reduce costs both In material savings, but also in productivity increases when it comes to processing the material. And the last piece I would like to mention here is also that it appears that our Buastar products Allow a higher mixing in of recycling content compared to some other products, which is of course Important in that context of circular economy that was discussed before. So What we can do with Boerstar then is to make a product range and portfolio that is Allowing us to be able to be present in those different segments that I showed in my presentation.
And then like I said, quite some investment into our technology, but also in our catalyst development capabilities to make sure that we can drive these innovations further on together with our customers and continue strengthening our Brand name and our customer relationships. But this is a very long topic, and I will then also say If you have time and can join in the Capital Markets Day, we can spend hours talking about this. Thank you.
Excellent. Look forward to it. Thanks, both.
Thanks, Matt. We have now a follow-up question from Thomas Adolff, Credit Suisse.
Thank you for taking the follow-up question. Just one on the dividend. If you go back to this time last year and you announced a dividend increase to €2, what magical formula And obviously, you ended up keeping it flat because of COVID. And now you've announced The increase from €175,000,000 to €185,000,000 what metric of €400,000,000 is used here? Thank you.
Thomas, considering that dividends always are paid for the previous year, 2019 has been a record year. And therefore, we decided that without knowledge of the adverse developments To the pandemic, in January last year, we still anticipated a little bit better economic environment. Therefore, we felt that for a record year, An increase in dividend is justified. We took it back to 175,000,000 which still is a record level at that time Because of the pandemic, but also we took the leap of faith to say, we will come strong through this difficult year and therefore we will not back as many of our peers did. I think we showed that we can do that.
And now we are seeing that while 20 20, the year for which we pay the dividend was a very difficult one. We see a little bit light at the end of the tunnel Of the pandemic. And therefore, it's not a big increase, but it's a signal of strength, it's a signal of appreciation for our shareholders That in this situation, we already take this increase and that is the magic formula. It's a lot of thoughts that go into that, but there is no formula, I'm afraid.
Thank you.
Thanks, Thomas. So, this brings us to the end of the conference call. We would like to thank you for joining us today.
That concludes today's teleconference call.