Romania started deep-sea hydrocarbon exploration in the Black Sea region in the 1970s
The Black Sea floor hides enormous hydrocarbon deposits. Romania started deep-sea hydrocarbon exploration in the Black Sea region as far back as in the 1970s. The first natural gas and oil deposits were found in 1980, and the Communist regime of the time even initiated extraction, although results were far below expectations.
At the start of the new millennium, novel technologies allowed for a better evaluation of those deposits. The results were no late to appear, particularly as far as natural gas reserves are concerned. Major companies on the international hydrocarbon market immediately expressed their interest in exploring these deposits, and the first important step was taken in 2008, when ExxonMobil, the world’s largest oil company, signed a partnership with OMV Petrom, the main Romanian player in the sector.
A second landmark was the February 2009 ruling in favour of Romania in its proceedings against Ukraine at the International Court of Justice in The Hague, with respect to the delimitation of the Black Sea continental shelf. At that time, Romania won the rights over 9,700 square kilometres, accounting for 80% of the disputed area.
International companies have sought substantial involvement in the operations ever since. ExxonMobil and OMV Petrom alone invested a combined 1.5 billion US dollars in Black Sea exploration works. In the following years, the results made public by stakeholders in the field were truly spectacular. In 2012, the 2 companies announced finding a deep-sea deposit put at 42 to 84 billion cubic metres of natural gas. Three years later, a group of companies led by Lukoil announced another deposit, estimated to reach some 30 billion cubic metres.
At present 10 perimeters are under exploration concession contracts with the Romanian state. The companies involved have set up the Romanian Black Sea Offshore Titleholders Association. The chief goal of the organisation is to support the development of the economic potential of the Romanian Black Sea shore, while also ensuring the highest protection standards for the environment, and health and safety standards for all those involved in offshore operations.
The association has recently commissioned a survey regarding the contribution of the Black Sea investment projects to the development of the Romanian economy, which was conducted by Deloitte company. The main conclusion of survey, presented by Razvan Nicolescu, a former Energy Minister and currently working for Deloitte, is that once Black Sea extraction begins, Romania will no longer need Russian gas imports and the country will go up the standings of the European countries the least dependent on energy imports.
Razvan Nicolescu: “Out of 28 EU member countries, as far as the dependence on resource imports is concerned, I believe we are only behind Estonia and Denmark. I think we may even improve this already honourable 3rd place.”
Officials of the National Agency for Mineral Resources, quoted by Razvan Nicolescu, estimate that some 200 billion cubic metres of natural gas might lie beneath the Black Sea floor. The report commissioned by the concession holders point to around 170 billion cubic metres. According to the document, 65% of the gas extracted from the Black Sea will be used in Romania, covering domestic consumption, while 35% will be exported, strengthening Romania’s position in the European market. Until 2040, the benefits are expected to be huge.
But in order to extract these resources, substantial investment is necessary, Deloitte experts explained. Here is Razvan Nicolescu again: “If the 15 billion US dollar investments that we estimate are actually implemented, and therefore we actually reach that output level of 170 billion cubic metres, we expect another 8.9 billion US dollars might be invested, not directly by the Black Sea operators, but collaterally, so to say. So if all these investments are made, Romania’s GDP will increase in these 23 years by nearly 42 billion US dollars.”
But for these targets to be reached, other conditions must also be met, apart from the amount of gas under the Black Sea or the market-set gas prices, the report also says. More specifically, the legislative framework must give investors as much stability and predictability as possible. On the other hand, an important question is how the rest of the Romanian economy will capitalise on the newly created opportunities.