ExxonMobil (NYSE:XOM) and Austria’s OMV Petrom are preparing to unleash Romania’s massive Black Sea potential with the launch of a 3-D seismic study of the country’s 6,000 square kilometer deep-water sector.
This week, ExxonMobil Exploration and Production Romania Limited and OMV Petrom S.A (SNP.RO) announced the seismic study—the largest to date in the Black Sea--of Romania’s Neptun block.
Earlier this year, the two discovered gas in the Domino area and the new seismic study will assess the commercial and technical feasibility of that find. It will also determine new exploration drilling targets.
Romania, for now, is on a roll, but banking on other disappointments in Eastern Europe, foreign oil companies are toning down their excitement, just in case.
In February, OMV and ExxonMobil—50-50 partners in the Neptun block—announced preliminary gas reserve estimates of between 1.5 and 3 trillion cubic feet in the block’s Domino-1 well.
And we’re talking about deep waters, here, so drilling is an expensive undertaking. All drilling rigs must be transported through the channel connecting the Mediterranean and the Black Sea, which means they need to maneuver under the bridges that cross the Bosporus. To do this, they must be dismantled.
The data from the new seismic study won’t be ready until sometime next year, and it will probably be two years before the first well is drilled, with real production still decades away.
But this is what it’s all about: Juniors and majors are jumping on future exploration potential as a more attractive prospect than hitting up proven reserves. It’s about new frontiers.
And Romania’s Black Sea is a particularly attractive frontier because of major discoveries in the Mediterranean of late.
Some 122 trillion cubic feet—twice Libya’s reserves, for instance—have been discovered in the Mediterranean. Of those, 25-33 trillion are in Israeli waters, with the rest belonging (not without conflict) to Cyprus (a particular bone of contention between the Greek- and Turkish-held parts of the island), Syria and Lebanon.
This potential has led the Black Sea to be dubbed “the New North Sea”. And while the Black Sea has always been eyed for its potential, exploration has been only sporadic and half-hearted. Why? Because there hasn’t been that much interest as long as the Black Sea countries were being satisfactorily supplied by Turkey, the Middle East and Russia. This perspective has changed, and Romania, for one, is no longer happy being a net importer of oil and gas and relying on Russia. But the technology, too, just wasn’t there for major deep-water operations.
Prices are up, and Romania needs to fill in some budget gaps. The foreign majors and juniors are happy to help because business conditions are improving, risk perception is changing and, of course, they’ve got their eye on a major prize.
By Charles Kennedy for Oilprice.com