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Black Sea offshore production in 2015 – a route to energy independence?

The Black Sea’s oil and gas reserves could be massive, but until recently most countries with access to its waters have shown little interest in getting any of it out – it has always been easier and cheaper to import from somewhere else. But the energy landscape is changing rapidly, and with diversification of supply at the top of the agenda for many countries, could 2015 be the year they start to make the most of the Black Sea’s potential? This is what could happen over the next eight months.

Romania                                       

Out of all the countries the Black Sea washes on to, Romania has probably made the most progress in developing fields. The only serious offshore activity so far has taken place in its blocks – after previously teaming up in the Neptun block in 2011, ExxonMobil and Romanian company Petrom combined last October to drill the Pelican South-1 well around 155 kilometers offshore in the Romanian sector of the Black Sea. Romania’s huge Domino-1 find in the same Neptun block, which could hold up to 84 bcm, is the largest discovery in the Black Sea to date, and there were rumours recently of another major find offshore. The Black Sea is important for Romania – its reserves there was one reason the country was able to cut imports from Russia by 61% in 2014, and when recently announcing a drop in its profits, Petrom was at pains to emphasise that Black Sea projects would be maintained to secure supplies within its borders.

Bulgaria

Bulgaria’s exploration has been limited so far, with the government concentrating more on securing supplies from other countries than producing any of its own. Exploration in the Khan Asparuh block, which could contain 100 bcm, has recently been pushed back a year from what would have been a mid-2015 start, but two tenders are out for blocks in the Silistar and Teres plays. A previous tender was issued for Teres in 2013, but there were no bidders and it was cancelled.

Turkey

Turkey has the largest Black Sea acreage, reportedly containing up to 10 billion barrels of oil, but so far this is yet to translate to much production. However, this could change in 2015 – a vessel has been built in the Tuzla shipyard to start Black Sea exploration operations which set sail on the last weekend of March, the first such ship launched by Turkey itself. Tough market conditions have affected Turkish Petroleum’s drilling plans, putting paid to around half of the 130 wells that were planned for this year, but according to CEO Besim Sisman, “the oil price won’t deter TPAO from drilling.” Turkey’s priorities recently have been transporting and trading oil and gas rather than extracting it, but 2015 should see a steady continuation of its Black Sea operations.

Georgia

Georgia’s oil and gas importance has always been as a transit country rather than a producer. Its oil reserves are tiny – just 35 million barrels – and unless serious payload is found in its acreage it is hard to see Georgia becoming a Black Sea producer any time soon.

Russia

Russia’s main oil-related activity in the Black Sea recently has been cleaning it up – a leak on the major pipeline from the Tuapse oil refinery last Christmas sent nine cubic metres of crude into the sea, requiring a state of emergency and a 300-person cleanup operation. The shelving of South Stream has also pushed drilling off Russia’s agenda, as efforts continue to develop an alternative route to get Russian gas to Europe.

In terms of Black Sea production, there had previously been plans to develop the 11,200 sq km Tuapse Trough acreage off the Krasnodar Region, with a joint venture with Eni signed in 2012, but although drilling was slated for the start of 2015 oil is yet to flow. A deal between Rosneft and ExxonMobil to drill in the Black Sea has been killed by sanctions, which in total have cost ExxonMobil over a billion dollars in lost revenue.

Russia’s Black Sea potential is considerable, but sanctions, a focus on LNG, and a drive to get major pipelines to China and Europe built may mean that drilling will have to wait.

Ukraine

Exploration in Ukraine’s Black Sea blocks has been limited in the past, as a ready supply of Russian gas meant there was no need to diversify supply. There definitely is a need now, though – the supply from Russia is less reliable than ever, and this means alternative sources and energy efficiency are top priorities for Ukraine’s government.

Ukraine’s problem is compounded, however, by the location of its offshore deposits – negotiations with Royal Dutch Shell on a production sharing agreement to develop the Skifska field were torpedoed by the Crimean crisis, and the considerable reserves around the Kerch Strait are in a similar situation.


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