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Black Sea gas potential huge, but regulation needed to speed up development

·2-min read
The logo of Romanian integrated oil company OMV Petrom is pictured outside its headquarters in Bucharest

BUCHAREST (Reuters) -The potential for further gas discoveries in Romania's Black Sea is huge, but the government needs to improve regulation to speed up development, the country's top gas producers said on Thursday.

Gas producers including OMV Petrom, majority-controlled by Austria's OMV, have spent 15 years and billions of dollars preparing to tap Romania's estimated 200 billion cubic metres of gas in the Black Sea, only to be stopped short by sudden fiscal and regulatory changes.

After years of stalling, Romanian lawmakers approved changes to offshore legislation earlier this year hoping to unlock investment.

"The potential for discovering gas in the Romanian Black Sea is huge, it's already been proven," Chief Executive Mark Beacom of Black Sea Oil & Gas (BSOG) told an energy conference.

"But if your point of the matter is just to find discoveries and let them sit there for 30 years, it has no point."

BSOG, controlled by U.S. private equity firm Carlyle Group LP, launched Romania's first offshore Black Sea development in three decades earlier this year, planning to extract 1 billion cubic metres of gas per year, or roughly 10% of Romania's consumption.

Beacom said the company was also looking at developing renewable energy offshore.

"Development time needs to get much much shorter," said Petrom Chief Executive Christina Verchere. "You have to have the right regulatory and fiscal framework and this is what we found challenging, it hasn't always been there."

OMV Petrom has yet to make a final investment decision on its Neptun Deep Black Sea deepwater project, where it discovered 1.5 trillion to 3 trillion cubic feet of gas.

The company, which will develop the project jointly with Romanian state-owned gas producer Romgaz, has said it needs further clarification on the newly amended offshore gas law and that it expects a decision around mid-2023.

On Wednesday, Romania’s energy minister said he expected a decision earlier, by end-2022.

"We have always said nine-12 months to be able to take the final investment decision, but pleased to assure you all speed is the name of the game," Verchere said.

Romgaz Chief Executive Razvan Popescu said the company was considering eurobonds or reserve-backed loans to finance its part of the project.

"We are extremely committed in having the Neptun Deep project finalized," Popescu said.

"This is where we see the most potential, we see potential of doubling our proven reserves and ... I think this has to be also something the whole state should be focused on given the importance of the strategic project."

(Reporting by Luiza Ilie; editing by Jonathan Oatis)