BARRIERS TO BLACK SEA GAS

Bureaucracy Holding Back Projects

Natural gas from the Black Sea is the solution for Romania’s energy independence, according to the country’s Oil and Gas Employers’ Federation (FPPG). In an open letter published in November 2021, it noted that to avoid the impact of rising energy prices and to strengthen resilience to future shocks, “the solution for our country … is to adopt a stable and predictable long-term energy policy that stimulates investment and, consequently, domestic energy production.”

The letter insisted: “In a balanced, stable and competitive legislative and regulatory context, Romania would have been much better prepared, having new energy sources in production today. Such an example is represented by the Black Sea gas projects, which could have been launched years ago, under conditions of an offshore legislative framework suitable for investments of this magnitude. Unfortunately, despite the industry’s efforts to communicate the specifics and benefits of offshore natural gas projects, the legislation in force (adopted in 2018) blocked the investments planned by companies and, implicitly, the advancement of projects.”

Three months later, Russia invaded Ukraine and the barriers rose higher. As George Nita, general manager at Holleman, Romania, said: “It is a war zone now and some international companies have left from some of the areas they want to explore near

BY FELICITY LANDON

Regions: Europe, Asia

Problem: Policy and regulations are stalling the progression of Black Sea gas infrastructure projects

Solution: An offshore law is a step in the direction, and project cargo movers are calling for more government support

Constanza. The Government is trying to encourage companies to come and explore but probably they have been discouraged.”

Holleman routinely transports oil and gas related items within Romania and Eastern Europe – mostly items coming into the Port of Constanza for final transport to site by barge or vessel.

Naturally, Romanian heavy-lift and project forwarding specialists have been directly impacted by the war in neighboring Ukraine. Nita said: “We have been affected by the war quite a lot; we are trying to adapt to the situation and do other jobs, but when Russia came into Ukraine, we were doing [wind turbine] work for Vestas and had to leave. There was a loss of money with that; we had prepared and budgeted and signed contracts for the job but only did a quarter of it.”

In addition, five trucks and trailers were requisitioned by the Ukrainian army and Holleman is still awaiting the promised payment for these, he said.

Emre Eldener, managing director of Istanbul-based Kita Logistics, said his company’s interest is in offshore gas exploration projects just off the coast of Turkey, which have not been too affected by the war so far.

Legislation Holding Back Growth

In October, Trillion Energy announced the preliminary gas indications from the first well drilled in its 2022-23 drilling campaign at the SASB gas field in the Black Sea off Turkey.

It has been estimated that Romania has 200 billion cubic meters of gas in its sector of the Black Sea. However, the FPPG emphasized in its letter the need for “clear provisions on fiscal and legislative stability, a balanced tax system and free market mechanisms,” warning that in the absence of Black Sea projects, Romania’s gas imports could increase to 50 percent by 2030. “Therefore, let us all try not to repeat the mistakes made in recent years. Companies are ready to launch multi-billion-euro projects to bring natural gas to shore for consumers.”

It added: “Natural gas in the Black Sea is the only solution for Romania to secure its access to energy and to successfully cross the period of energy transition. Moreover, Black Sea projects can support the relaunch of some industrial sectors in Romania and would generate significant contributions to the state budget.”

The introduction of a tax on offshore gas income in 2018 had been a particular issue discouraging commitment – as reported by Reuters, it prompted ExxonMobil’s exit and OMV Petrom’s decision to put the Neptun Deep project on hold. During 2022, the law was amended to reduce the tax and remove export restrictions. Gas producers are still pushing the government to improve regulation to speed up development.

The exit of ExxonMobil was finalized in August when state-controlled Romgaz, Romania’s largest natural gas producer and main supplier, announced that it had secured 50 percent of the rights over the Neptun Deep project by acquiring all the shares issued by ExxonMobil Exploration and Production Romania. OMV Petrom holds the other 50 percent in Neptun Deep.

In December, Reuters reported that OMV Petrom and Romgaz had filed paperwork that brought them closer to starting extraction at Neptun Deep, which holds an estimated 42-84 billion cubic meters of gas. However, OMV Petrom said it would not make a final investment decision until mid-2023, as it awaited clarification from the government on the newly amended offshore gas law.

First Gas Celebrated

There has been some movement. In June 2022, Black Sea Oil & Gas (BSOG) and its partners Petro Ventures Resources and Gas Plus Dacia announced that production had started from the Midia Gas Development (MGD) Project and first gas had been delivered to Romania’s national transmission system.

Expected to deliver 0.5 billion cubic meters in 2022, the MGD project’s peak production is put at 1 billion cubic meters per year. MGD represents the first new offshore gas development in Romania in more than three decades. The start of production was welcomed by Romania’s Prime Minister, Nicolae Ciucă, who said: “The Romanian Government will always be a partner of all investors who add value to our country and contribute to the wellbeing of our citizens.” The Offshore Law allowed the continuation of natural gas exploitation projects in the Black Sea, “with prospects of turning Romania into a gas exporter in the coming years,” he said.

BSOG CEO Mark Beacom added: “It has been a long and challenging journey to finally reach this significant milestone for the country. A number of firsts were achieved in Romania, all during a global pandemic and, more recently, conflict in Ukraine that threatened to impact Black Sea operations.”

While providing 10 percent of Romania’s gas demand, the project was also laying the path and possibly even the infrastructure for other developers in the Black Sea, he added.

Three months later, however, as gas producers urged the government to improve regulation, Beacom noted: “The potential for discovering gas in the Romanian Black Sea is huge –it’s already been proven. But if your point is just to find discoveries and let them sit there for 30 years, it has no point.”

OMV Petrom chief executive Christina Verchere added: “Development time needs to get much shorter. You have to have the right regulatory and fiscal framework, and this is what we found challenging – it hasn’t aways been there.” BB

Felicity Landon is an award-winning freelance journalist specializing in the ports, shipping, transport and logistics sectors.