September 7, 2018 / 9:04 AM / 7 months ago

INTERVIEW-OMV plans exploration deal in Asia by year-end

* Aims to agree an exploration deal in Asia by year-end

* Tunisian asset up for sale, Polarled JV sold

* Internal production cost target of less than $7/boe

* Planned Gazprom asset swap: solution seen by year-end

By Kirsti Knolle and Alexandra Schwarz-Goerlich

VIENNA, Sept 7 (Reuters) - Austrian oil and gas group OMV plans to expand its exploration business with an acquisition in Southeast Asia by the end of the year, in line with its strategy to grow in low-cost markets outside Europe, its upstream chief told Reuters.

OMV is betting on further growth in fossil fuels, instead of flocking to renewables like many of its rivals, forecasting a strong increase in demand for natural gas in particular because burning it emits less carbon dioxide than oil.

The group, whose presence in Russia and countries such as Libya and Yemen makes it vulnerable to geopolitical tensions there, expanded in New Zealand and the United Arab Emirates earlier this year to try to balance risks.

Johann Pleininger, responsible for OMV’s exploration and production business, has compiled a list of three to five companies and 10 to 15 assets “that are attractive for us” in Australia, Indonesia, Thailand, Vietnam and Malaysia, he told Reuters in an interview.

“I hope that we will be able to conclude a contract by the end of the year,” he said, without elaborating on the size of the expected deal.

Of the 10 billion euros ($12 billion) set aside for acquisitions until 2025, OMV has so far spent 2 billion.

Pleininger declined to comment on a Reuters report last month that OMV was interested in the Malaysian gas fields of U.S. peer Hess Corp.

However, he said any deal would have to be in cooperation with a strong regional player comparable to OMV’s partnership with Gazprom in Russia and with Abu Dhabi National Oil Company (ADNOC) in the United Arab Emirates.

Such a partner was important to secure support in another country, said the Austrian, who has been working for OMV for more than 40 years.

Hess is an equal partner with state-owned energy firm Petronas in the Malaysian fields.

OMV’s focus on low costs, introduced when Rainer Seele took the group’s helm three years ago, requires further asset sales, Pleininger said.

The partly state-owned group recently agreed to sell its stakes in the Norwegian Polarled gas pipeline project and in the Nyhamma gas processing plant to private equity-backed CapeOmega , he told Reuters. The supervisory board and the Norwegian government still had to approve the deal.

A “high-priced asset in Tunisia”, where the Austrian company has been operating since 1971, and an asset in Madagascar were also on Pleininger’s list of assets to sell.

Thanks to Seele’s focus on low-cost countries such as Russia, OMV’s production costs have more than halved since 2014.

To produce one barrel of oil equivalent (boe) - or the amount of energy equivalent to that found in a barrel of crude oil - cost it $7.5 in the first half of this year.

There is not too much room for further improvements, according to Pleininger, but the “internal goal” was “less than $7”, which would put OMV among the best in the industry.

Regarding a long planned asset swap with Gazprom, Pleininger said he hoped for a solution by the end of the year.

“Our priority is still the asset swap,” he said, when asked about a Reuters report that the group might prefer to simply buy some of its partner’s Siberian assets instead of swapping them after Norway criticized the plan to give Gazprom access to assets in Norway.

But he also said the non-cash deal’s significance had been different when agreed in 2016, when OMV was struggling with weakening reserves and no financial buffer. Its cash position stood at 3 billion euros at the end of June.

“For us it is important to have a solution,” Pleininger said.

$1 = 0.8601 euros Reporting by Kirsti Knolle; Editing by Mark Potter

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