The stake of gas worth over USD 20bn in the Black Sea is to which shore the pipeline will be built

  • Deepwater Champion, the vessel used by Petrom and Exxon for exploratory drilling in the Black Sea, has a length of 229 meters. The ship, built in South Korea, but especially designed for the Black Sea, can drill up to a 3,000 meters depth and is worth USD 1bn.
  • Gas extracted by OMV Petrom and Exxon must reach Romania through pipeline to be able to talk about an increase in energy independence.
  • The stake of gas discovered in the Black Sea, if the reserves identified by Petrom and ExxonMobil in the Neptun block prove to be commercial, is to which coast the pipeline to connect this “pocket” to shore will be built. 

[cleeng_content id=”556828278″ description=”Buy this translation today. This article has 6998 characters with spaces. ” price=”13.99″ t=”article”]The place where the 42-84bcm of gas reserves were discovered is 170km off the Romanian coast and 220km off Turkey’s coast to the Black Sea. An offshore pipeline is worth about EUR 1.4mln per kilometer, thus the entire pipeline to shore would cost about EUR 200mln. Basically, Romania’s energy independence from Russian gas imports will be ensured only if these amounts are brought on the local market. Currently, it’s not clear whether the Austrians and Americans are forced to bring gas to Romania. “A joint venture should be made between Petrom, ExxonMobil and Transgaz (the national operator of the natural gas transmission system – Ed.) to build the pipeline that will carry these gas reserves to shore. It’s a matter of negotiation. I have discussed with the National Agency for Mineral Resources (NAMR) to begin an offshore legislation, which will regulate all aspects related to exploration, transmission, taxes and royalties. We must consider everything for the Black Sea. I don’t want to lose this opportunity for Romania”, Minister Delegate for Energy Constantin Nita said yesterday. Grup Servicii Petroliere, the Romanian company controlled by businessman Gabriel Comanescu, has built an offshore pipeline of 150km for the Russians in the Black Sea, worth USD 269mln. Even if OMV Petrom and ExxonMobil have stated that works in Neptun block are in an early phase, the discussion about the future destination of gas discovered here makes sense, especially given the context in which Romania imports about 25% of its consumption demand from Russia and the current gas reserves will last only 15 years, according to the latest data. A gas discovery has been made 170km off the Romanian coast, of 42-84bcm of gas. If the maximum value of the interval is considered, and a recovery factor of 70%, it results a value of this discovery of over USD 20bn. Basically, from this discovery alone Romania could meet its entire consumption for 4 years or it could quit Russian imports for 20 years. These calculations make sense however only if these gas reserves actually reach the Romanian shore. “Now the operator disposes of everything it finds there. In the old petroleum law, the state had the preemptive right, but in 2004 this provision was removed”, Corneliu Condrea, director of the oil and gas department of the Ministry of Economy, said.

Someone removed from the law the preemption right of the Romanian state

In the former Petroleum Law no. 134/1995, at chapter 3, article 27, letter d) the following stipulations were made: holders of petroleum agreements are entitled to dispose of the oil amounts due, according to the clauses of the petroleum agreement, which have not been purchased by the Romanian state, including to export such amounts. In June 2004, the former law was approved and replaced by the Petroleum Law no. 238/2004. Here, the right of holders of petroleum agreements is to dispose of the oil amounts due, according to clauses of the petroleum agreement, including for export, the state thus being removed from the equation. Asked why this amendment was made, Condrea said that changes came upon pressure from the European Union. In December 2004, the state decided to sell the majority stake owned in Petrom to Austria’s OMV group, in a deal through which around EUR 750mln was collected for the shares. The operation was followed by a share capital increase with a similar value. Also, the law stipulates that it is the right of the holder of petroleum agreement to assemble collection pipelines and own facilities for the transportation of its oil and petroleum products.

Transgaz does not insist on its right to transmit the gas

Recently, a Transgaz official has stated in turn that the entire investment in pipelines that would connect the Black Sea reserves to shore would amount to dozens of millions of euros and that such investments would be made by companies involved in the project, without excluding a contribution from Transgaz. Asked if it was possible however for Petrom to make a decision to build the pipeline to another shore than the Romanian Black Sea shore, Transgaz official has stated that it would depend to a certain extent on negotiations to be held with the Romanian state. “If Romania is obtuse, if it requires unacceptable conditions, this version is possible”, Mihai Pătârniche, director of the natural gas dispatch of Transgaz, has stated at that time. Allusions to market conditions have also been made by the CEO of OMV, Gerhard Roiss, during a conference held in 2012. At that time, Roiss stated that gas that could be extracted from the depths of the Black Sea would first be used to supply the Romanian market, but it wouldn’t happen if gas prices on the local market, the royalty level and the size of the field don’t justify the investment, assessed at billions of USD.

OMV has great interest in Turkey, where it has paid EUR 1bn for Petrol Ofisi

Currently, the Domino-1 well, which brought the first results on the existence of gas at great depths in the Black Sea, is located at a distance of 170km from the Romanian coast, in waters with depths of around 1,000 meters. To the closest point of the Turkish coast, for example, there is a distance of around 200km. In October 2010, OMV paid EUR 1bn to acquire the Turkish company Petrol Ofisi, which owns a network of fuel stations of over 3,000 distribution units. At the same time, OMV’s plans for Turkey are to build a gas-fired power plant of about 860MW, in Samsun, to the Black Sea coast. The power plant is similar to that built in Brazi, after an investment of EUR 530mln. Moreover, Turkey is the most promising market in terms of consumption, since the prospects offered by the European market are not encouraging. At the same time, Nabucco, the investment under discussion for more than a decade, and which was planned to reduce the European dependence on Russian gas imports by connecting to the Caspian region, was shrunk in 2012, the project’s shareholders officially announcing, after months of rumors, the drastic downsize of the gas pipeline, from 3,900km to only 1,300km. If up to that point the gas pipeline had to directly connect to the rich Caspian reserves, more precisely the Azerbaijani gas field Shah Deniz II, Nabucco West, the downsized version of the project, loses a very important aspect, namely control over the import route, which will be in the hands of Turkey. That’s because BOTAS (Turkey), together with the Azerbaijani company SOCAR, have come up with their own project, Trans-Anatolian Pipeline (TANAP), which would cross Turkey and could connect in the future to gas resources from Iraq, beyond the Caspian reserves. Basically, Nabucco West will be supplied through TANAP. Partners in the development of Shah Deniz II gas field, from which 16bcm of gas will be extracted per year, are the oil giant BP (25.5%), Norway’s Statoil (25.5%), SOCAR (10%), Lukoil (10%), France’s Total (10%), National Iranian Oil Company (10%) and Turkey’s TPAO (9%).  [/cleeng_content]

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