The race for Black Sea gas reserves is hotter than ever as carbon emission certificates reached EUR53, a level hard to imagine last year and nearly impossible to manage for energy producers from conventional sources.
“If the right incentives are provided, OMV Petrom would need around 12 months to prepare for a final investment decision. The first volumes could be produced four years after taking the FID,” Franck Neel, executive board member of OMV Petrom, told ICIS in an interview.
The Neptun Deep offshore block is estimated to hold natural gas resources amounting to as much as 80 billion cubic meters. Exxon and OMV Petrom have invested $1.5 billion in the exploration of the block so far but Exxon is now looking to sell its stake in the venture after the project became stuck following legislation changes.
Romanian gas producer Romgaz has submitted a binding bid to acquire its stake in the project and OMV Petrom will act as operator for Neptun Deep block if the bid is accepted.
Romania could switch from a nearly self-sufficient gas market to an import-dependent country within a decade if it fails to develop its offshore Black Sea production, Neel warned. He said the country’s gas imports could soar to as much as 40% of total demand within ten years from an estimated 17% demand currently.
Neel said Romania could reverse the natural decline at maturing onshore fields by providing the correct incentives for offshore production in its economic zone of the Black Sea where total reserves are estimated at 200 billion cubic meters.
If production at Neptun Deep starts in the upcoming years, Romania could not only use some of the volumes for its own needs but also export to neighboring countries, he said.
A Race against Time
Time is becoming the main enemy of the project in the context of energy transition, as Romania needs to rely on natural gas to switch from coal-fired to green energy.
Although gas-fired energy production is more efficient, it still generates CO2 emissions and the price of emission certificates reached EUR53 a piece from EUR24 in 2020.
While Romania is one of the most advanced countries in terms of reserve appraisals, competition in the Black Sea is rising as Turkey said in 2020 reserves at its offshore Tuna – 1 exploration zone may be as high as 405 billion cubic meters.
“There is a strong regional competition, which develops on two dimensions. Several countries try to attract gas flows from several non-EU routes while others try to find additional gas resources in the Black Sea. In this fierce competition for regional market share, Romania has a competitive advantage,” Neel told ICIS.