As part of the European Commission’s Action Plan on Financing Sustainable Growth Regulation (EU) 2020/852 established an EU classification system for environmentally sustainable economic activities (EU Taxonomy) and came into force in 2020.
The EU Taxonomy is a key instrument for the European Union to redirect capital flows toward sustainable investments and to create market transparency. It encourages increased channeling of investments by companies, investors, and policymakers to where they are most needed for sustainable development. Therefore, the EU Taxonomy Regulation will play an important role in scaling up sustainable investments and implementing the European Green Deal.
For the OMV Petrom Group, the EU Taxonomy provides a means to assess which of our current and future economic activities can be classed as environmentally sustainable. According to the Taxonomy Regulation, any activity identified in this category must make a substantial contribution to at least one of the EU’s environmental objectives, in addition to not significantly harming any of the objectives and also meeting the defined minimum social safeguards.
The six relevant environmental objectives of the Taxonomy Regulation are:
1. Climate change mitigation
2. Climate change adaptation
3. The sustainable use and protection of water and marine resources
4. The transition to a circular economy
5. Pollution prevention and control
6. The protection and restoration of biodiversity and ecosystems
In June 2021, the Commission formally adopted the Climate Delegated Act, establishing the criteria that define which activities substantially contribute to climate change mitigation and adaptation, the first two out of the six environmental objectives. The disclosure requirements were effective from January 1, 2022, in relation to the aforementioned climate change objectives. In 2022, the Complementary Delegated Act was released, which extends the EU taxonomy framework to permit certain economic activities involving gas and nuclear energy to be classified as “environmentally sustainable” and applies from January 1, 2023. The EU taxonomy for the four remaining environmental objectives is still pending publication by the European Commission.
OMV Petrom’s process for identifying and assessing EU Taxonomy activities
An economic activity is eligible for the EU Taxonomy if it matches the description of the activity given in the EU Taxonomy. In order to identify eligible activities/products/ projects at OMV Petrom, we performed a screening of the full portfolio of OMV Petrom activities and compared our activities to the description of the economic activities/products listed in Annex I or II of the EU Taxonomy Climate Delegated Act.
The assessment of eligible activities and products at OMV Petrom was carried out by an interdisciplinary project team, using both a bottom-up and a top-down approach. A series of internal meetings and workshops with management and experts was held in order to give OMV Petrom businesses an introduction to the new EU Taxonomy and disclosure requirements. A further series of workshops was held with all business segments and corporate entities to ensure the bottom-up identification of eligible activities, assets, processes, projects and related eligible CAPEX/OPEX/ turnover. OMV Petrom’s identified EU Taxonomy-eligible economic activities are all related to the environmental objective of climate change mitigation.
In 2022, OMV Petrom carried out an alignment assessment based on the EU Taxonomy criteria, assessing whether the identified eligible activities fulfill the criteria for substantial contribution to climate change mitigation, the do-no-significant-harm (DNSH) criteria of the other environmental objectives, and the criteria for minimum social safeguards.
Responsibility for the alignment checks and evidence gathering was clearly defined in the Group EU Taxonomy Guidance. The project/ Asset Managers for the respective eligible project/activity were responsible for assessing compliance with the criteria for substantial contribution to climate change mitigation and the DNSH to water and marine resources, circular economy, pollution prevention and control, and biodiversity and ecosystems. Support was provided by the sustainability experts from OMV Petrom and OMV Group. The required physical and climate risk and vulnerability assessments to comply with the DNSH climate change adaptation criteria were performed centrally by sustainability and risk management experts, and with the support of an external provider in line with the Group’s Enterprise-Wide Risk Management approach.
The assessment of compliance with the minimum social safeguards and governance criteria was performed by sustainability experts by assessing whether the clauses in relevant Group policies (Human Rights Policy, Code of Conduct, Code of Business Ethics, Tax Strategy) are in line with the international standards referred to in the EU Taxonomy. It was further assessed whether OMV Petrom’s human rights management system and its related processes (e.g., grievance mechanisms, community consultation) are established in line with these international standards. The detailed assessment showed no gaps between the Group’s approach to human rights policies, addressing of impacts, due diligence and risk assessment procedures, communication, grievance mechanisms, consumer interests, anti-corruption, competition, or taxation and the social safeguard requirements laid out in the EU Taxonomy.
No relevant final liability regarding breaches of the minimum safeguards have been identified at OMV Petrom in recent years, including breach of labor law or human rights, breach of corruption or competition laws, or breach of tax laws.
The economic activities that OMV Petrom identified as aligning with the EU Taxonomy are all related to the environmental objective of climate change mitigation.
OMV Petrom’s valuesfor the KPIs are derived from the figures reported in the OMV Petrom Group’s consolidated IFRS financial statements. The KPIs are calculated on the basis of the consolidated sales revenues, CAPEX, and OPEX of OMV Petrom SA and its fully consolidated subsidiaries.
Subsidiaries that are not fully consolidated, associated companies and joint ventures were excluded from the assessment as per the reporting requirements of the EU Taxonomy Regulation.
The proportion of taxonomy-aligned economic activities in the sales revenues, CAPEX, and OPEX (the “alignment ratio”) has been calculated as the part of sales revenues, CAPEX, and OPEX derived from products, services and projects associated with taxonomy-aligned economic activities (numerator) divided by the total sales revenues, CAPEX, and OPEX (denominator). The same logic applies to the calculation of the “eligibility ratio”.
The denominators for the financial KPIs were defined as follows:
The denominator of the turnover KPI is based on OMV Petrom’s consolidated sales revenues (OMV Petrom Consolidated Financial Statements 2022, Note 19). For further details on our accounting policies regarding consolidated sales revenues, see OMV Petrom Consolidated Financial Statements 2022, Note 4.3.p).
The denominator for the CAPEX KPI consists of additions to intangible assets (including oil and gas properties with unproved reserves) and tangible assets (including right-of-use assets), excluding capitalized decommissioning costs (OMV Petrom Consolidated Financial Statements 2022, Note 6 and 7). For further details on our accounting policies regarding the relevant assets, see OMV Petrom Consolidated Financial Statements 2022, Note 4.3.d), e), f), g).
Total OPEX consists of research and development (R&D) expenses, maintenance and repair costs, other direct expenditure related to day-to-day servicing of assets and short-term leases.
R&D expenses include the research and development expenditure recognized according to IAS 38 “Intangible assets” and included in the line “Other operating expenses” in the income statement (see OMV Petrom Consolidated Financial Statements 2022, Note 22).
Maintenance and repair costs and other direct expenditure related to day-to-day servicing of assets mainly include costs for external services, personnel expenses, and material costs related to regular and unplanned maintenance, repairs, and servicing measures. The related cost items can be found in the line items “Production and operating expenses” and “Selling, distribution, and administrative expenses” in the income statements.
Expenses for short-term leases have been determined and included in line with IFRS 16 “Leases”.
Direct costs for training and other human resources improvement needs are immaterial and therefore excluded from the denominator and the numerator.
For most of the activities, sales revenues, CAPEX, and OPEX for aligned and eligible activities could be allocated directly to individual activities listed in the taxonomy based on data available in the Group entities’ ERP systems. This ensured that there was no double counting of aligned or eligible sales revenues, CAPEX, and OPEX.
In the refinery, CAPEX related to assets used in the joint production of fuels and organic basic chemicals, as well as maintenance and repair costs allocated to cost centers involved in the joint production of fuels and organic basic chemicals, have been allocated to the production of organic basic chemicals (activity 3.14) using an allocation key reflecting the yield, size, and complexity of the different refinery plants used for this purpose.
Taxonomy-eligible and aligned turnover
In 2022, 17.92% of OMV Petrom’s turnover could be classified as taxonomy eligible. There was no taxonomy-aligned turnover in 2022.
The eligible turnover relates mainly to activities 4.29 Electricity generation from fossil gaseous fuels, mostly in relation to power sales produced by CCPP and 3.14 Manufacture of organic basic chemicals (e.g., sales of toluene, benzene and propylene), both activities contributing to 99.94% of our Taxonomy-eligible Turnover.
The increase in taxonomy eligible turnover share as compared to prior year is mainly due to the inclusion of electricity generation from gas as eligible activities in 2022, following the issuance of the Complementary Delegated Act. Eligible turnover in 2022 includes turnover from the sale of power and heat produced from natural gas (4.29 Electricity generation from fossil gaseous fuels and 4.30 High-efficiency co-generation of heat/cool and power from fossil gaseous fuels). The power was mainly produced at CCPP. Turnover associated with other gas-related activities, including the production of natural gas and gas supply, marketing, trading, and logistics, is reported as non-eligible turnover. The eligible turnover for the prior year’s KPI does not include any gas-related activities.
The split of aligned and eligible turnover between revenue from contracts with customers and revenue within the scope of IFRS 9 “Financial instruments” is included in the following table. Eligible revenue from transactions within the scope of IFRS 9 includes power sales from the CCPP.
|Aligned turnover (in RON mn)
|Eligible turnover (in RON mn)
|Revenue from contracts with customers (IFRS 15)
|Revenue from transactions within the scope of IFRS 9
Taxonomy-eligible and aligned CAPEX
In 2022, 12.48% of OMV Petrom’s CAPEX could be classified as taxonomy-eligible, and 0.41% could be classified as taxonomy-aligned.
The largest contributors to eligible CAPEX were the activities 4.29 Electricity generation from fossil gaseous fuels and 3.14 Manufacture of organic basic chemicals, both reflecting our transition to low carbon business. Together, these made up 66.41% of our taxonomy-eligible CAPEX. Other contributors were mainly activities 6.14 Infrastructure for rail transport, 4.13 Manufacture of biogas and biofuels for use in transport and of bioliquids (e.g. sustainable aviation fuel) and 6.5 Transport by motorbikes, passenger cars, light commercial vehicles.
The largest contributors to aligned CAPEX were from activity 7.6 Installation, maintenance, and repair of renewable energy technologies (e.g. installation of PV panels and heat pumps) and activity 6.15 Infrastructure enabling low-carbon road transport (e.g., electric charging points).
The increase in taxonomy eligible CAPEX share as compared to prior year is mainly due to the inclusion of electricity generation from gas as eligible activities in 2022, following the issuance of the Complementary Delegated Act. In 2022, eligible CAPEX included CAPEX for gas-fired power plants and for gas- powered generators used for OMV Petrom’s own consumption (4.29 Electricity generation from fossil gaseous fuels and 4.30 High-efficiency co-generation of heat/cool and power from fossil gaseous fuels). The eligible CAPEX for the prior year’s KPI does not include any gas-related activities.
CAPEX associated with other gas-related activities, mainly for gas assets in the E&P business, was reported as non-eligible CAPEX.
Aligned and eligible CAPEX can be disaggregated into additions to the different asset classes in the table below. Additions to right-of-use assets are included in additions to property, plant, and equipment.
|Aligned CAPEX (in RON mn)
|Eligible CAPEX (in RON mn)
|Additions to property, plant, and equipment
|Additions to capitalized development costs
|Additions to other intangible assets
According to our 2030 Strategy, the total planned investments in low and zero carbon projects amount to EUR 3.7 bn.
These include investment commitments for activities that are already aligned in 2022, like renewable power generation (i.e., electricity generation using PV technology) and alternative mobility (i.e. EV charging points) activities, as well as a series of taxonomy-eligible activities that have not yet been claimed as taxonomy-aligned in 2022, but will potentially be aligned in the future, such as hydrogen, biofuels, and carbon capture and storage activities.
Taxonomy-eligible and aligned OPEX
In 2022, 16.52% of OMV Petrom’s OPEX could be classified as taxonomy-eligible.
The largest contributors to eligible OPEX were the activities 4.29 Electricity generation from fossil gaseous fuels, 9.1 Close to market research, development, and innovation, 3.14 Manufacture of organic basic chemicals and 4.9 Transmission and distribution of electricity. Together, these made up 92.76% of our taxonomy-eligible OPEX.
There was no aligned OPEX in 2022.
The increase in taxonomy eligible OPEX share as compared to prior year is mainly due to the inclusion of electricity generation from gas as eligible activities in 2022, following the issuance of the Complementary Delegated Act. In 2022, eligible OPEX included OPEX for activities related to the production of power from natural gas (4.29 Electricity generation from fossil gaseous fuels), which predominantly include maintenance expenses for CCPP gas-fired power plant and for gas-powered generators used for OMV Petrom’s own power consumption. OPEX associated with other gas-related activities, which is mainly related to the production of natural gas in the E&P business, is reported as non-eligible OPEX. The OPEX KPI for 2021 did not include any gas-related activities.
|Aligned OPEX (in RON mn)
|Eligible OPEX (in RON mn)
|Research and development expenses
|Expenses for maintenance and repairs
|Short-term lease expenses
OMV Petrom has an ambition of net zero in operation by 2050 and has set ambitious GHG reduction targets for 2030 across all GHG scopes. In order to achieve those targets, a significant amount of CAPEX will be allocated to low-carbon business projects and activities between now and 2030. Organic CAPEX growth will be driven by investments in sustainable and low-carbon projects in all three business segments of OMV Petrom, ~35% of our CAPEX will shift to low and zero carbon business. OMV Petrom will invest EUR 11 bn, the largest private investment plan in the Romanian energy sector between 2022 and 2030.
In 2023, we expect the publication of the remaining four environmental objectives of the EU Taxonomy. This means that in the coming year, we will assess our eligible and aligned activities with reference to the additional four environmental objectives and report on those activities.