Welcome to the OMV Group's Conference Call. You should have received the presentation via 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. 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 any information currently available to OMD. 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. OMD disclaims any obligation and does not intend to update these forward looking statements to reflect actual results, revised assumptions and expectations and future developments and events. This presentation does not contain any recommendation or invitation to buy or sell securities in OMV.
I would now like to hand the conference over to Mr. Florian Gregor, Head of Investor Relations. Please go ahead, Mr. Gregor.
Yes. Thank you. Good morning, ladies and gentlemen. Welcome to OMV's earnings call for the Q4 2019. With me on the call are Rainer Selle, OMV's Chairman and CEO Reinhard Florij, our CFO Hans Pleininger, Deputy CEO and in the Board responsible for Upstream and Thomas Gangel, the Board Member for Refining and Petrochemical Operations.
As always, Rainer Sehle will walk you through the highlights of the quarter and will discuss OMV's financial performance. Following his presentation, the 4 board members are available to answer your questions. And with that, I'll hand it over to Rainer.
Yes. Thanks, and good morning, ladies and gentlemen, and thank you for joining us today. The Q4 of 2019 was characterized by significant volatility, low gas prices and weaker PACAM margins offset OMV's substantial increase in production to above the 500,000 barrels per day mark and the outstanding refinery utilization. Let me start by briefly reviewing the economic environment. In the Q4 of 2019, the Brent oil price averaged $63 per barrel, slightly up quarter on quarter, but 8% down year on year.
Prices showed an upwards trend throughout the Q4, moving from just under $60 per barrel in October to a 7 month high at the end of 2019 of around $68 per barrel. The main drivers were the emerging optimism over a possible trade deal between the U. S. And China as well as the OPEC plus decision to further cut production. European gas prices saw a slight increase compared with the 3rd quarter, but they were almost 50% lower than the Q4 of 2018.
Global LNG continued to push surplus volumes into Europe. Prices were shortly supported by colder weather in November. However, they started to decrease by mid December as a gas transit agreement between Russia and the Ukraine became more and more likely. The refining margins averaged $5 per barrel, 8% lower quarter on quarter and 4% lower year on year. The decrease, however, masks a very volatile quarter.
October saw a strong jump in the margins to $7.5 per barrel, while in December, the refining margin fell to an average $2.7 per barrel, driven by weak middle distillates and a rising oil price. The ethylene and propylene margin declined by 18% versus the 3rd quarter and by 28% versus the Q4 of 2018. For both products, the market became long, aggravated by year end destocking activities. Butadiene margins were substantially below the previous year's level and benzene margins decreased as well. Although we had a better operational performance, the Clean CCS operating results declined by 26 percent to €781,000,000 This was due to the weaker market environment, in particular in gas and petrochemicals as well as higher depreciation.
Despite the market headwinds, our quarterly cash flow from the operating activities excluding net working capital effects remained robust at €963,000,000 We continue to show a strong operational performance in Upstream. We increased our production to more than 500,000 barrels per day for the first time in the quarter, while our cost remained below $7 per barrel. In downstream, our refineries ran at an exceptional rate of 98%. In the Q4, we continued with our active portfolio management. In November, we agreed to divest the 69% interest in the Mari field in New Zealand.
This is a mature field with an average production in 2018 of around 5,000 barrels per day net to OMV. The divestment further optimizes our portfolio and will change OMV New Zealand to a gas only producer. It is yet another step in our strategy to shift our upstream production towards gas in order to reduce the carbon intensity of our portfolio. Last but not least, we deliver on our progressive dividend policy and then once again increase our dividend. We will propose to the Annual General Meeting a dividend per share of €2,000 up 14% versus the previous year.
Let's now turn to more details of our financial performance in the Q4 of 2019. Our clean CCS operating result decreased by 26% versus the strong prior year quarter. In upstream, earnings were 21% lower year on year, significantly impacted by weaker gas prices and higher depreciation. Downstream earnings were down 13% versus the prior year quarter, which had benefited from strong petrochemical margins and the favorable regional supply situation. The clean tax rate amounted to 43%, 7 percentage points above the previous year's quarter, following a higher contribution from high tax rate fiscal regimes in upstream, especially Libya.
Berlin CCS net income attributable to stockholders decreased by 37 percent to €310,000,000 CleanCCS earnings per share came in at €0.95 Let me now come to the performance of our 2 business segments. Compared to the Q4 of 2018, the Upstream Clean result decreased by €119,000,000 to €459,000,000 mainly due to weaker prices, lower oil sales in Norway and higher depreciation. Market FX had a negative impact of €91,000,000 a reflection of lower realized oil and gas prices, partially compensated by a stronger U. S. Dollar.
OMV's realized oil price decreased by 2%, while the SEK gas price in Austria dropped sharply by 48%, the OMV realized gas price decreased only by 18%. This is explained by the international portfolio of OMV, only 40% of our gas sales are linked to the European hub prices. The market prices in other countries recorded a lower decline, while the realized gas price in Romania slightly increased. Production went up by 58,000 to 505,000 barrels per day, driven by the acquisitions in New Zealand and Malaysia as well as the production ramp up of Astra Hansteen in Norway and our fields in Abu Dhabi. In Libya, we were able to produce 35,000 barrels per day higher than the same period last year.
Production in Romania decreased due to natural decline and the divestment of marginal fields, partly compensated by the start up of new wells. At the end of December, Sapura OMV started production at the Lara gas field, which is part of SK408. Our total sales volumes increased by 50,000 barrels per day, mainly coming from gas in Malaysia and New Zealand. Oil sales were only marginally higher as we recorded one less oil lifting in Norway than in the Q4 of 2018 due to the lifting schedule. Our production cost was basically flat at $6.4 per barrel.
Depreciation increased by €75,000,000 due to the acquisition and higher production in Norway and Libya. In downstream, the clean CCS operating results decreased by 13% to €385,000,000 In Dansim Oil, result was €303,000,000 20% below the prior year quarter, primarily due to materially weaker petrochemical margins. The refining margin declined slightly as a result of weaker middle distillate cracks, which were partly offset by higher gasoline and naphtha cracks. Our operational performance was once again strong, reflected in the outstanding refining utilization rate of 98%, well above the European average around 80%. The supply shortages in the Q4 of 2018 driven by a refining outage in Southern Germany and the low Rhine water levels normalized in the Q4 of 2019.
As a result, retail margins and commercial volumes decreased. The Petchem result declined sharply by 56% to €35,000,000 due to the substantially lower margins, which could only be partially offset by lower feedstock costs. The contribution from Borealis decreased by 25 percent to €50,000,000 The main drivers were a lower Buruj result impacted by the weak Asian markets and softer integrated polyolefin margins. The ADNOC Refining and Trading business contributed €18,000,000 in the Q4 of 2019. We still had some operational challenges as the FCC was not running stable throughout the quarter.
The result was positively impacted by a one time effect. The trading joint venture is expected to start in the Q3 of this year. The clean operating result in Downstream Gas grew significantly to €82,000,000 mainly due to the storage business, where we recorded the unwinding of summer winter spread hedges. The gas sales volumes increased by 37% year on year driven by sales in Romania and Germany, while we managed to increase our market share to 5% at the end of the year. Turning to cash flow.
The Q4 was again strong with an operating cash flow, excluding net working capital effects of €963,000,000 This includes a dividend from Borealis of €153,000,000 Looking at a full year picture, the operating cash flow excluding net working capital effects, slightly increased to €4,300,000,000 We delivered €2,100,000,000 in organic free cash flow in 2019, 15% lower versus the year before due to the negative net working capital effects. The cash flow from inorganic investments came in at €2,700,000,000 primarily reflecting the payment for the 15% shareholding in ADNOC Refining and Trading as well as the 50% share in Sapura OMV. Putting our last year's performance into perspective, despite a weaker macro environment, we managed to achieve a clean CCS operating result of €3,500,000,000 in 2019, almost at the record level of the year before. Both business segments delivered a strong result. Our cash delivery continued to be strong.
We are clearly on a structurally new level of cash generation. In the last 3 years, we delivered an operating cash flow excluding net working capital effects of some €4,000,000,000 The natural hedge provided by our integrated and balanced Upstream and Downstream segments is key for our ability to generate strong and sustainable cash flows despite market volatility. Despite major acquisitions, OMV's balance sheet remained very healthy and showed strong liquidity with a cash position of €2,900,000,000 at the end of the 4th quarter. Following the payment of the 15% share ADNOC Refining and Trading in July 2019, the net debt increased materially in the Q3 of 2019. However, we were already able to decrease it to €4,700,000,000 in the 4th quarter.
Consequently, our gearing ratio declined to 28%. This includes the impact of IFRS 16 of around 5 percentage points versus 2018. Ladies and gentlemen, as I already mentioned, we will again deliver on our progressive dividend policy. We will propose to the Annual General Meeting a dividend of €2 per share for 2019. This is an increase of 14% compared to the previous year and marks another record in OMV's history.
Since 2015, we have increased our dividends at an average rate of 19% per year. We here with reconfirm our progressive dividend policy. Let's now come to the outlook of this year. For 2020, we assume an average Brent price of $60 per barrel and expect the average realized gas price to be below the level of 2019. The refining indicator margin is projected to be above $5 per barrel.
We have hedged around 60% of our total middle distillates volume at the high crack level we have seen in October last year. Petrochemical margins have recovered from the low levels we have seen in the Q4 of 2019. For the full year 2020, we estimate these margins to average slightly below €400 per tonne. On the operational level, as demonstrated in the Q4 of 2019, we have the capacity to produce more than 500,000 barrels a day. However, as the production in Libya is currently shut in, we expect an average production of around 500,000 barrels per day in 2020.
This depends, of course, on the security situation in Libya. We expect increased production in Malaysia and Tunisia, while we assume a decline in Romania, Russia and New Zealand. Exploration and appraisal expenditures are expected to be around €350,000,000 The utilization rate of the European refineries is expected to be around 95% in 2020. There are no major turnarounds planned in Europe this year. However, we will have scheduled maintenance work at our refineries in Austria and Romania, mainly in the Q2.
In Abu Dhabi, there is also plant maintenance shutdown in the first half of this year. Total product sales will be on a similar level compared to 2019. Retail and commercial margins are predicted to be slightly lower than those in 2019 as regional supply shortages normalized at the end of 2019. Natural gas sales volumes in 2020 are projected to be above those in 2019. Organic CapEx is projected to come in at around €2,400,000,000 thereof €1,600,000,000 in Upstream.
We expect the clean tax rate for the year 2020 to be in the high 30s. Before we come to your questions, I would like to address an important topic that has shaped the public discussion and which is of particular importance for the future of our how to tackle the climate change. We take this topic very seriously. Our strategy is based on 3 pillars: more gas, less oil more valuable products, burn less and develop innovative technologies. And we have already made progress.
We have increased our gas share to around 60%. We are active in e mobility solutions. We work on processing biofuels, and we are at the forefront for research and chemical recycling of plastics. We have further advanced with our re oil process and are now focusing on the scale up, first to a demonstration plant with a capacity of up to 20,000 tonnes per year and then to an industrial scale plant of 200,000 tonnes per year. The latter expected by 2020 5.
But ladies and gentlemen, the world is transitioning fast. We will intensify our efforts to position ourselves successfully in a lower carbon world. This means we have to continue to actively shape our portfolio. And this includes not only divestments, but again also acquisitions. Both need to fit into the three areas I mentioned before and have to be financially attractive.
Let me conclude my remarks with announcing that we will hold a Capital Markets Day mid of this year. We plan to give you an update on our strategy and present how we want to position ourselves in a fundamentally changing environment. Thank you for your attention. Now my colleagues and I are more than happy to take your questions.
Thank you. The first question comes from the line of Michael Alsford. Apologies, may I transfer?
Yes. Thank you. As you have said already, the first question comes from Michael Alsford, Citi.
Thanks for taking my questions. I've got a couple, if I could, please. I was just wondering if you could maybe elaborate a little bit more on how you see your progression towards your medium term targets. Clearly, cash flow generation in the year was actually pretty good despite what was obviously a challenging 4Q environment. But you've talked about getting to over EUR 5,000,000,000 of cash generation over the medium term.
So given the macro outlook, which has clearly changed a lot, could you maybe give us some confidence as to delivering that sort of target over the midterm? And similarly on production, you've talked about a 600,000 barrel per day target. I'm just wondering whether you can talk about, given the portfolio changes, that is still a target that you feel you can meet with the current portfolio? That was my first sort of question. And then just secondly, just specifically on ADNOC Refining.
You made a small contribution in the quarter. You mentioned a onetime effect. I was just wondering if you could perhaps talk a bit about what you think the contribution can be from that business in 2020. You mentioned the FCC issues, but just wondering what you think that could deliver this year.
Michael, this is Reinhard speaking. Regarding your question about our propositions and targets on the mid or long term. On the cash flow side, the target of €5,000,000,000 seems to be with further execution of our strategy, a value that is in reach. Of course, we are very much aware about volatilities in the commodity markets these days. However, of course, also our strategy will adapt to those situations and the target to increase the level, which started at a level of €3,000,000,000 for a couple of years.
Now, I think the 3rd year in a row, we delivered about €4,000,000,000 And now the next logical step until 2020 5 midterm is €5,000,000,000 and we would confirm that.
Expect that we'll receive a dividend for the financial year 2020. We are, at the moment, supporting with our experts on-site also to improve the stability of the RFCC cracker. As Rainer mentioned, there is a turnaround this year in the first half, and there are activities to improve that. And midterm, we anticipate a dividend yield of above 10%, as mentioned earlier, so everything in line with previous statements.
Thanks. And just to follow-up on the production long term guidance.
Yes. Mike, regarding your question regarding long term production, long term until 2025, how do we achieve the 600,000 barrels, which we have been promised in March 2008 in London. What you have seen in Q4 is that we have the capacity to go slightly above the 500,000 already right now. As Rainer mentioned, it depends very much also on the security situation in Libya. So that's why we forecast for this year the 500,000, around 500,000 barrels in average for the entire year.
If we start from there, what we have been started already is also in portfolio optimization. So we will sell 5,000 barrels roughly in Marie in New Zealand from our oil production. Kazakhstan, we started already the process what we have been producing in the last 2 years was between 7,000,8,000 barrels per day. Additional production will come from Neptun until end of 2024, around 70,000 BOE from Argimo 4, 5 until 2025, also 70,000, 80,000 barrels per day from our Russian asset. Sapura, we have been starting last year with around 12,000, 13,000 BOE per day With the startup of the Larac field, we have been doubling the production since January this year and will double the production or more than double the production from where we are right now.
So we go beyond 50,000. So if you add this up, 70 Neptune, 7080 Achimov, 25 Sapura and Nevada in Tunisia, we will bring on stream also this year around 10,000, then you will end up with 180,000 barrels plus and then you need to deduct the decline and some portfolio optimizations as I mentioned before. And then you will see that we are clearly above 600,000 barrels per day.
The next question comes from Henri Patricot, UBS.
Yes, hello, everyone. Thank you for the presentation. Two questions for me. One, the first one, financial around the dividend and if you can provide just a bit more detail around your thinking going forward following this, again sizable increase for the 2019 dividends? Or should we expect to see similar increases in the future as long as you keep the debt levels below your target range?
Any indications around that would be helpful. And then secondly, I to ask around the petrochemical business, which was pretty much weak in the Q4. And you mentioned a number of products delivering very weak margins. Seems like things have improved a little bit in the Q1. So that's expected a bit of a rebound in terms of EBIT contribution from both your own operations and Borealis in 2020 compared to the level of the Q4?
Thank you.
Henri, regarding your question on dividend, as you have heard the proposal of the management of OMV is to increase the dividend payment per share to €2 This is a clear increase from €175,000,000 by almost 15%. This is very much in line also with the increase of the profit per share that we have in comparison to 2018. So this is if you take EPS comparison, this is very much in line and is also, of course, in line with the dividend policy that we have given. We think that this is very much adequate also to a situation where we were able to keep a gearing at 28%, very much in the line with our target ranges that we have for the midterm. And we have enough firepower on the stability of our balance sheet in order also to do the transition that Rainer has talked about.
So we stick with the dividend policy also for the coming years to say that there will be progressive increase targeted of the dividend year after year. And this is what you have seen now in the 5th consecutive year if you go to the past. So I think we have demonstrated that it's not only words, it is exactly what we deliver.
Henri, Reinhard hasn't changed. He explains a lot, but he is not releasing any numbers as we speak about future dividends. It's all the
same, okay? So
we went well. All right. But you should try further, yes. Maybe you catch a special moment with him. Let's talk about pet chem because pet chem is very important in these days.
If you recall that we have seen a €363 per tonne in the 4th quarter. We are talking about mainly about ethylene and propylene about the performance of our pad can business. The other products I have mentioned are smaller products like butadiene and benzene. Our assumption for 2020 is a different level, margin level like we have seen in the Q4. We have guided you that this is something around €400 per tonne.
And we don't see that already in the market. I think in the Q4, we have seen the bottom line in C2, C3 margins. And we have seen a recovery of the margin end of January. We are now on a more healthy level. It was helpful that we have seen in Europe also some maintenance shutdowns of some crackers.
And especially you have to see that there was an incident in Tarragona in Spain. It was in the ethylene value chain. You might look into that because this had an impact into the market. So as we speak about the PET CAM business, I think over here in Europe, we feel comfortable with our €400 per ton right now. The other products like Benzene, Benzene is a rollercoaster product.
This is the price curve you see in the market and you should be prepared for rollercoaster also in 2020. But I repeat myself, the Benzene business is really small compared to our ethylene propylene business in PET Chem. Butadiene is lacking, of course, the low call in the tire markets. Still, we have we do have a comfortable price level. Let's wait and see how the impacts of the coronavirus will be on the automotive industry.
From my point of view, it's more important to look into ethylene and propylene and don't worry too much about the 2 other product groups when you evaluate OMV with the expected performance in 2020.
Understood. Thank you, both.
Okay. The next question comes from Sachi Chilukuro, Morgan Stanley.
Hi, good morning. I had three questions, please. The first thing, I just wanted to comment on the Borealis dividend. Essentially, it has been strong. But looking into the future, are you expecting any material reduction in the dividend that you are expecting from Borealis?
The second question, I just wanted to check on the strategy itself. Now that you mentioned acquisitions are back in the table, mostly on the low carbon assets, I just wanted to understand how big these would be or any in terms of size and whether the dividends and the distribution of dividends still maintain is your top priority of post CapEx, is your top priority for distributions? And the last one, I just wanted to understand your your expectations of Romanian gas prices. What your expectations were in for 2020 and a little bit beyond?
Sassy, quickly on the Borealis dividend. Borealis is extremely successful company in the market. Of course, also undergoing the cycle. And we are seeing currently cycle in petrochemicals rather on the lower level than on the higher level. Nevertheless, this is a company that has also in the past given a very steady flow of dividends.
We have seen some extra dividend in this year. We might not expect this special situation in the years to come. However, the overall performance is seen to be very strong and very stable. So don't worry about the dividends in general.
Well, Sasji, I will have the same story. You shouldn't worry too much about the dividends. Whatever we say and we have guided, our dividend policy is written in stone. Although we see now the business environment changing and especially the transition our industry has to prepare, OMV will focus on a portfolio change, which is reflecting that we have to prepare the company for low carbon world. So when we're talking about these acquisitions, and I repeat myself, we are not talking only about acquisitions.
Don't pick only one message. This was a combination. I have started with divestments and not with acquisitions, to be honest, and repeating what I have in my head presented in my speech. So it will be both when I talk about portfolio optimization. It will be in the framework of the strategy the OMV Board has presented to the financial market.
And if you remember our strategy, we have set and we have written a budget until 2025 for acquisitions. By the way, we have not budgeted the divestments, but I think we have to give you then later on some guidance where this will lead. But first of all, we have to say, this will be just in the framework of our explained strategy, corporate strategy to the financial markets, which means also that the dividend policy, which was part of our strategy is not impacted at all. Yes. Also, Henri would like to know some numbers.
I know I can't give you numbers, but the dividend policy stays as it is, like we have explained to the market, although we have to go for a portfolio optimization. The prices in Romania for gas prices, well, I said this morning in an interview with CNBC, I really need to have an ice blizzard to talk about better gas prices. We have guided you that the gas prices will be slightly below the unsatisfactory price level we have seen last year. So I'm not very, very optimistic on the gas prices. The impact on remaining gas prices will be less than the impact on Western European gas prices.
This is something I can tell you. The reason is because of the coronavirus outbreak, we do see more LNG cargoes landing in Europe, impacting the hub prices, especially in Northwestern Europe. And that's the reason why I think we need to have a stronger demand to compensate or to absorb the additional volumes coming from China or we need to have a super medicine that the infection rate of the coronavirus goes down. So these are the 2 topics I have to say in the context of the gas prices in Europe.
Thank you very much. Very clear.
There are currently no further questions in the line. If you would like to ask one, you still have the opportunity to do this or a follow-up. Okay. There's a follow-up question from Ori Patrikou.
Yes. Thank you. Just one follow-up on the topic of Romania. If you can give us an update on Neptune Deep. I mean, you mentioned, and answered your previous question, 2024 startup potentially.
So I was wondering if you can give us an update on the latest around both the regulatory framework and whether you're more confident about that framework? And secondly, around the structure of the partnership to develop the field?
Okay, Ovi, I will take the question. Regarding Neptun, as you have maybe realized that there was there is no government anymore since yesterday. So our hope was that the offshore law will be approved by the government in these days, let's say, in Q1. Right now, we have to put a question mark on this topic because there is no government. So we can not speculate when we will get this approval of the offshore law.
But what we can say right now is that we keep the first gas, the start up of production end of 2024, because it's still feasible and realistic. But we would need and we would get or we would need to get a government approval, I would say, as soon as possible. From the deal structure here, the question is rather you need to ask X Mobile, X Mobile listed in the driving seat. We have 50% share in Neptun. We will keep the 50% share.
ExxonMobil, we know we'll test the market. What I can ensure you that we will not take over the 50% from X Mobile, but the rest is with X Mobile, how they are deciding how to test the market. Okay.
Thank you.
Good. So there are now a couple of more questions. The next one
is from Josh Stone, Barclays.
Sorry, is it late on to the call? So I'm going to ask my questions and hopefully you won't be repeating yourselves. But first, I was hoping for an update on ADNOC refining. I know there was the outage in the Q4, whether that's been fixed now and what your expectations are for kind of earnings run rate in 2020? Secondly, on net debt, have you got any what your sort of outlook here, what you're thinking about net debt and gearing in 2020 given the CapEx and macro outlook you've presented?
And then lastly, you did highlight some hedges in your presentation. Just wanted to see if you're able to disclose how long those hedges are locked in for. Thank you.
Hi, Josh. So about ADNOC Refining and RFCC. So we had in the Q4 still issues with the performance of the RFCC. The unit was running, but not with the quality that we expect. So we have now the opportunity in the turnaround, which is in these weeks now, to fix some topics there, and we hopefully see the results and improvement.
So this is ongoing activity, but we see a good chance to fix most of that.
Josh, regarding net debt, you have seen that we were able to reduce our net debt from quarter 3 to quarter 4 from €4,900,000,000 to below €4,700,000,000 In principle, I have already indicated our mid term gearing expectation that the gearing target of 30%, excluding our effects from the IFRS 16 would still be what we see on the midterm. Of course, this company has theoretically a much higher capacity to take net debt. However, we follow, I would say, financial stability strategy on the midterm, which allows us to exactly execute on the strategy as we have done so far. So don't forget, we have come a very long way on our strategy already without overstretching the financial capacity of this company. And we will also continue and keep the situation on the midterm target as we have indicated.
Josh, I am delighted to give you an answer on the hedges. It's covering the full year 2020.
Thank you.
Downstream, yes. So it's a downstream hedge on the margins, on the refining margins. So what we have safeguarded is roughly $1 per barrel in 2020 on our refining margin. And that's the reason why we are also saying it's about $5 per barrel and we are expecting a higher refining margin next year this year in 2020.
Yes. Very clear. Thank you.
There's a follow-up question from Sussi, Morgan Stanley.
Hi. Just a quick follow-up on the production guidance. I was just wondering what you're putting in for Libya for 2020. I know it's kind of contingent on that, but I just was what is the number? How long do you think this shutdown will happen in your guidance for 500,000 barrels per day?
For 2020, our guidance is 35,000 BOE per day if L'Oreal is on stream. So regarding when it will come on stream, we can't say anything right now.
And we have a follow-up from Michael Alsford, Citi.
Thanks. I'll take the opportunity for a follow-up as well. I just wanted you to maybe just elaborate more on Nord Stream 2. It gets a lot of headlines. I just wondered if you could maybe just confirm some of your financial exposure to the project, how you see that sort of being the return being sort of repaid over the medium term?
And then just the sort of timing around the progress on the project, that would be helpful. Thank you.
All right. Okay. Michael, let me have
a look into the crystal ball. Well, it's a little bit complicated to say anything about the timing. What I can say is that OMV more or less has financed the project. So we are not expecting high cash calls from Nord Stream 2 Company in 2020. We have already financed something around €700,000,000 into the project.
The delay of the project, it doesn't matter which startup date we both are talking about, has no impact on the rate of return of our participation in the project, which means that the cash return is a bit later, but might come on a higher level. That's point number 1 when we talk about all the impacts. We do have contractual agreements where I cannot go into detail because of confidentiality agreements, but we feel comfortable that the risk in the project is not that we are losing our money. Timing. Well, first of all, let's wait and see what kind of fantasy in terms of sanctions is developing, yes?
I'm not joining the club of speculators what kind of additional sanctions might come. I see that in the press. But at the end of the day, we have to deal with the situation as it is. There are no construction activities at pipe lay activities at the moment for Nord Stream 2 pipeline. The construction has stopped just after the sanctions.
You could see it implemented extraterrestrial unilateral by the U. S. You could see that in the press. We don't see now short term that the company will continue the pipelaying activities. When it will be?
Honestly speaking, Michael, I haven't had and I haven't received an invitation from Nord Stream 2 Company that they would like to present a plan B to us. So that's the reason why I say why I tell you that the pipe lay activities will not restart shortly.
Thanks. Very helpful.
We now come to Oleg Galbuhr, Raiffeisen, Centrobank.
Yes. Thank you. I have a short follow-up on the hedging policy for the upstream segment. And I apologize if you have already answered this question. I had some technical issues.
So my question is, if you have for 2020 any hedges in place and if you could provide more details on how much oil, how much gas has been hedged? Thank you.
The shortest answer, no hedges.
Thank you.
In upstream, of course.
Thanks.
Good. And we now come to Rafael Dubois, Societe Generale.
Hello. Good morning. I just have one question on petchem. Can you share with us if either at Borealis or at OMV, you're thinking about postponing any of the projects that are currently in the pipeline?
Rafael, can you specify a little bit which projects you have in mind? Because there so that I don't run Well, I'm
thinking about Boru 4 and also the potential new cracker in India, the one in Kazakhstan. And you also have this MOU for something in Indonesia. So considering the change in environment, are those projects still on the table?
So the projects that you mentioned are most of them are more long term addressing the growth in demand there in this region. And so these projects are more MoU type of, except the Parouche, Parouche, Parouche IV, the activities are ongoing. So the project is in development. So we think there is good progress on that one. For the other one, let's see where we will then land.
This is something where I do not expect that the actual development of margins is really the relevant one. We see for petchem prices always this cycle, and this is something where we are now not on the top, more on a lower level, but this will not influence the decisions for those projects.
Thank you.
Well, Rafael, just one addition, yes, because you have mentioned Kazakhstan. I only make a personal statement that I'm not a real fan of this country.
So there are no further questions. So we are at the end of our conference call. I'd like to thank you for joining us. Should you have any further questions, please contact the Investor Relations team and we will be happy to help you. Goodbye and have a nice day.
That concludes today's teleconference call. A replay of the call will be available for 1 week. The number is printed on the teleconference invitation. Or alternatively, please contact OMV's Investor Relations department directly to obtain the replay numbers. Thank you.