Non-Integral Oil and Gas Business
BASF holds 72.7% of the ordinary shares in Wintershall Dea AG; 27.3% are held by LetterOne. The preference shares previously held by BASF were converted into ordinary shares on May 1, 2022.
The price of a barrel of reference Brent crude oil averaged $101 in 2022 (2021: $71 per barrel). Gas prices on the European spot markets averaged €124.16 per MWh ($38.01 per mmBtu) for the year, more than double the prior-year level and more than ten times the 2020 level. The sharp increase in gas prices was driven by the extremely tight European gas market in 2022 due to the significant reduction in gas supplied by Russia to the E.U.
Equity-accounted income of the oil and gas business
Wintershall Dea AG contributed –€4,853 million to net income from shareholdings in 2022 (2021: –€344 million). This included special items totaling –€6,307 million, primarily resulting from impairments on Wintershall Dea’s Russian assets, the financing of Nord Stream 2, Wintershall Dea’s participating interest in Nord Stream AG, and on assets in the German gas transportation business. In the previous year, lower oil and gas price forecasts and a divestiture of assets in Argentina led to impairments of €581 million.
BASF received dividend payments of approximately €1 billion from Wintershall Dea in 2022. In the previous year, dividend payments from Wintershall Dea amounted to €488 million.
Wintershall Dea conducts production, development1 and exploration activities in the following countries:
- Egypt (production, development, exploration)
- Algeria (production)
- Argentina (production, development)
- Denmark (production, exploration)
- Germany (production, development, exploration)
- Libya (production)
- Mexico (production, development, exploration)
- Netherlands (production, development, exploration)
- Norway (production, development, exploration)
- Russia (activities deconsolidated in Q4 2022)
- United Arab Emirates (development)
- United Kingdom (production, development, exploration)
Wintershall Dea is also active in gas transportation. This includes interests in GASCADE Gastransport GmbH and OPAL Gastransport GmbH & Co. KG held by WIGA Transport Beteiligungs-GmbH & Co. KG, and the interest in Nord Stream AG held directly by Wintershall Dea AG.
Current developments in the Russian business
Due to increasing restrictions on its ability to influence its investments in Russia, largely as a result of government interference, Wintershall Dea deconsolidated its Russian segment in the fourth quarter of 2022 and subsequently recognized it as a financial asset measured at fair value in accordance with IFRS 9. This figure is materially impaired by interference by the Russian government, especially in the second half of 2022. This significantly burdened earnings at Wintershall Dea and the BASF Group. Together with further impairments on assets relating to the Russian business – Wintershall Dea’s participating interests in Nord Stream AG and WIGA Transport Beteiligungs-GmbH & Co. KG, as well as the loan to Nord Stream 2 AG – the special charge in income from non-integral shareholdings accounted for using the equity method amounted to €6,517 million. On January 17, 2023, Wintershall Dea announced its full exit from Russia in compliance with all legal requirements.
Wintershall Dea’s activities in 2022
Wintershall Dea produced 218 million BOE (barrels of oil equivalent) in 2022 (2021: 231 million BOE), of which around 157 million BOE of gas (2021: 165 million BOE of gas). This corresponded to a daily production of 597 thousand BOE (2021: 634 thousand BOE).
Several development projects were successfully completed in 2022, including the Norwegian projects Nova, Dvalin and Njord. Production at Nova and Njord started in July and December 2022, respectively; Dvalin is scheduled to come on stream in early 2023.
Field development permits for the Dvalin North and Maria Phase 2 projects in Norway were applied for at the end of 2022. To further develop CMA-1 in Argentina, the CMA-1 consortium reached a final investment decision for the Fénix gas project in October 2022.
Wintershall Dea drilled 14 exploration wells in 2022, half of which were successful. The result of one well is still pending.
At the beginning of 2022, Wintershall Dea reached an agreement on the sale of its 50% interest in the unconventional oil blocks it operated in Argentina and decided to terminate its operations in Brazil.
In February 2022, Wintershall Dea announced that it had divested its interest in the Gulf of Suez concession to the Egyptian General Petroleum Corporation, Cairo, Egypt, with retroactive effect as of January 1, 2022.
In October 2022, Wintershall Dea signed an agreement with Hokchi Energy, the Mexican subsidiary of Pan American Energy, to acquire a 37% participating interest in the producing Hokchi Block.
In November 2022, Wintershall Dea sold its operated Brage oil field, its full interest in the Ivar Aasen oil field and a 6% interest in the Nova field development project to OKEA, Trondheim, Norway.
As part of its climate strategy, Wintershall Dea aims to achieve net zero emissions2 from upstream activities by 2030. In addition, the company is investing in various projects that aim to contribute to global decarbonization.
Wintershall Dea and several partners have initiated the BlueHyNow project on the German North Sea coast in Wilhelmshaven, which aims to produce hydrogen from natural gas. CO2 separated during the production of hydrogen will be shipped by sea to offshore locations in Norway and Denmark and stored under the seabed in underground reservoirs.
Together with Equinor, Stavanger, Norway, Wintershall Dea plans to pursue the development of an extensive and safe Carbon Capture and Storage (CCS) value chain connecting continental European CO2 emitters to offshore storage sites on the Norwegian Continental Shelf (Nor-Ge project).
Wintershall Dea and its partner CapeOmega, Bergen, Norway, have been awarded a CO2 storage licence in the Norwegian North Sea by the Ministry of Petroleum and Energy. Wintershall Dea will be the operator of this licence, which is estimated to hold a CO2 storage injection capacity of up to 5 million tons per year.
An initial public offering (IPO) of Wintershall Dea AG would be virtually impossible in the current environment since the start of the Russian war against Ukraine. BASF stands by its strategic goal of divesting its share in Wintershall Dea AG and accordingly, continues to target an IPO of Wintershall Dea.
1 Development activities include projects before and after the FID (final investment decision)
2 Scope 1 and 2 emissions from upstream activities operated and non-operated by Wintershall Dea at an equity basis