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The great potential of the Black Sea region: gas is a key element for the energy transition in Romania – interview with Christina Verchere, CEO OMV Petrom

The Black Sea has huge potential to be a substantial contributor to the region’s economic development, to improve energy security and to enable the energy transition and therefore OMV Petrom, Romania’s top oil and gas producer, will continue to expand in this area, says Christina Verchere, the CEO of the Group. And although gas is seen as the main driver in the energy transition, at least for the Black Sea region, the company is assessing other various sustainable energy projects, including solar, photovoltaics and biofuels.

“Most of the fields we operate in Romania are mature and that means that in order to ensure production, we need to compensate for the natural decline,” Mrs Verchere tells CEENERGYNEWS. “Either by using new technologies that allow us to take out more out of the current reserves or by exploring new acreage.”

In March, this year, OMV Petrom, the largest energy company in South-Eastern Europe, announced the signing of the Production Sharing Contract (PSC) for the offshore Block II in the exclusive economic zone of the Georgian Black Sea. OMV Petrom won in June 2020 the international tender organised by the Ministry of Economy and Sustainable Development of Georgia for offshore acreage. The PSC provides for the exploration, development and production of hydrocarbon resources in the offshore Block II. It covers a total area of 5.282 square kilometres and the water depth varies between 400 and 2.000 meters.

“The next steps (in Georgia) include geoscientific and environmental studies, in preparation for a large offshore 3D seismic campaign in 2022,” says Mrs Verchere. “This will allow for a detailed evaluation of this block’s potential.”

Last year, in August, OMV Petrom also completed the transaction for the acquisition of 100 per cent of the shares in OMV Offshore Bulgaria from OMV Exploration & Production and entered the Han-Asparuh exploration block in Bulgaria. Following Repsol’s exit, the Bulgarian regulator approved the allocation of Repsol’s 30 per cent participating interest to the remaining two partners. Han-Asparuh is located in the western Black Sea in Bulgaria, south of the Neptun Deep Block in Romania and has an area of 13.819 square kilometres with maximum water depths of over 2.000 metres. Exploration activities started in 2012 and included geological and geophysical surveys and the drilling of three exploration wells. An extensive 3D seismic campaign was finalized in May 2020 covering 5.614 square kilometres. The seismic data are currently being processed and, based on the results, future exploration activities will be undertaken by the joint venture.

“In Bulgaria, we continue with seismic data processing in 2021 in order to identify future drilling candidates,” continues the CEO of OMV Petrom.

Neptun Deep in Romania remains the largest offshore exploration and production project of OMV Petrom in the Back Sea region, but its development is entirely reliant on how the Romanian government will change the Offshore Law. Time is crucial, Mrs Verchere says.

Courtesy of OMV Petrom.

“These projects are in different stages, with Neptun Deep being the most advanced; it’s a discovered and appraised reserve, ready to be developed, while in Georgia and Bulgaria we are in earlier phases of exploration,” she explains. “For the Romanian Black Sea gas projects, we expect to see the specific legislation (Offshore Law) amended. It’s a highly prospective area and unlocking these gas resources underpins cleaner energy and economic prosperity. When it comes to amending Offshore Law, time is essential, taking into account the economics of the projects and the time required to developing them. For offshore projects, it can take several years from investment decision to production.”

Given the energy transition trend, all these developments in conventional gas might seems a risky strategy, but Mrs Verchere says that the region cannot engage on the transition path without using its local gas resources.

“Taking into account our Romanian upstream legacy, both onshore and offshore, regional growth in the Black Sea area was a natural step,” she points out.

“We believe that energy transition requires multiple solutions and we should look at these solutions taking into account the specific of the region, availability of natural resources, availability of technologies as well as the current energy system. In this context, natural gas is definitely a key element for a successful energy transition in Romania and in the region.”

Currently, OMV Petrom’s operations in the Black Sea deliver approximately 10 per cent of Romania’s gas demand.

“OMV Petrom has an uninterrupted presence in the Black Sea for over 40 years and we have gained valuable operatorship experience during this time,” Mrs Verchere continues. “We have consistent knowledge of the Black Sea geological structure, we have partnered with reputed global companies in various Upstream projects and as part of an international group, we have access to state-of-the-art technologies and to the best project management practices.”

Mrs Verchere also underlines that natural gas is available and versatile, it can hugely contribute to lowering CO2 emissions and it can offer spare capacity for renewables. It can be stored, compressed, liquefied and transported safely both on short and on long distances, with multiple applications in power production, heating, cooking and transportation.

“By expanding in the Black Sea area, through the projects that we entered in Georgia and Bulgaria, we can generate economic value for this region, especially taking into account that the post-pandemic recovery agenda is linked with the 2030 and 2050 climate targets,” she adds.

“The Black Sea has huge potential to be a substantial contributor to the region’s economic development, to improve energy security and to enable the energy transition.”

Mrs Verchere did not mention an investment budget for all these developments but said that the projects will require a multi-billion-dollar financial effort.

“We see a great potential in the Black Sea region: therefore, we will continue to look for opportunities, in business-friendly environments,” she says.

OMV Petrom filling station. Courtesy of OMV Petrom.

Besides its exploration and production activities, OMV Petrom gas a regional filling stations network of almost 800 units in Romania, Bulgaria, Serbia and Moldova.

“In terms of mobility offer, we believe this should include a mix of fuels, conventional and alternative,” the CEO of OMV Petrom highlights. “Therefore, we started to develop a network of electric vehicle charging stations in line with our expectations of increased electromobility. We aim to have 40 electric rechargers in Romania and Bulgaria, by the end of 2021, through our partnerships with Eldrive and EnelX.”

Not the least, 82 of the company’s filling stations in Romania are connected to green energy, with installed photovoltaic panels.

“In terms of the convenience store, we have progressed with the partnership between Petrom and Auchan, with 48 locations opened as at the end of March 2021,” she says. “We have an ambitious upgrading program for the entire Petrom branded network in Romania: approximately 400 filling stations located in rural and urban areas of the country will be refurbished both inside and outside and will accommodate MyAuchan proximity stores in the next 5 years. In addition, card and mobile payment solutions will be set up at the pump in selected stations, with fast lanes created for fuelling.”

Also, OMV Petrom will expand into new areas of business on its energy transition path.

“In order to contribute to a cleaner environment, in addition to our efforts for lowering the CO2 emissions, we are assessing various sustainable energy projects, including solar, photovoltaics and biofuels,” Mrs Verchere reveals.

“In the second half of this year, we will provide a strategy update, including our approach regarding energy transition”, according to the company’s 2020 Annual Report.

In the first quarter of 2021, the consolidated sales of OMV Petrom decreased by 20 per cent compared to the first quarter of 2020, to 4.8 billion lei (almost 1 billion euro), negatively impacted by lower sales volumes of natural gas, petroleum products and electricity, as well as lower prices for natural gas, partially offset by higher prices for electricity. The net income also decreased to 573 million lei (approximately 118 million euro).

“In the first quarter of this year, Romanian market showed early signs of recovery, however, we expect the volatility and uncertainties due to covid-19 pandemic to persist in 2021 as well,” Mrs Verchere concludes. “The pace of economic revival will continue to be contingent on the evolution of the pandemic.”

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